RECONSTRUCTING 
AMERICA: 

OUR  NEXT  BIG  JOB 


EDWIN  WILDMAN,  Ed. 


WY/VERSITY  of  CALIFORNIA 


RECONSTRUCTING   AMERICA 
OUR  NEXT  BIG  JOB 


Copyright   by 


I'KKSIDKNT    \V<  ><  >I>K<  )\V    WILSON 


(See  page  2) 


RECONSTRUCTING 
AMERICA: 

OUR  NEXT   BIG  JOB 


The  Latest  Word  on  the  Vital  Subjects  of  the  Hour. 
The  Views  on  Reconstruction  and  Readjustment  of 
the  Country's  Greatest  Thinkers  and  Constructive  and 
Industrial  Geniuses,  including  Pres.  Woodrow  Wilson, 
Hon.  Wm.  H.  Tart,  Hon.  Wm.  G.  McAdoo, 
Charles  M.  Schwab,  Elbert  H.  Gary,  Samuel 
Gompers,  Frank  A.Vanderlip,  John  D.  Rockefeller,  Jr., 
Paul  M.  Warburg  and  others. 


EDITED   BY 

EDWIN  W1LDMAN 

Editor  of  "  The  Forum,"   Author  of  "  Atfuinitlilo,"  etc 


Illustrated   irith   Portraits 


T  H  E     P  A  C  K     C  0  M  P  A  X  Y 
BOSTON      *      M  Dl'C1  CC  X  I  X 


v\ 


Copyright,  1919,  by 
THE  PAGE  COMPANY 


All  rights 


First  impression,  April.  1919 


INTRODUCTION 

JUST  what  form  reconstruction  will  take  in  national 
economics  is  a  question  that  provokes  diversified  opinion. 
That  the  War  has  left  unsolved  the  problems  of  Peace 
is  obvious.  War  is  the  conduct  of  force  in  disregard  of 
the  law  of  supply  and  demand,  indifferent  to  the  in- 
dividual and  wholly  in  consideration  of  the  fighting 
arm.  The  problem  that  comes  after  is  the  readjustment 
of  inflation  and  the  readjustment  from  abnormal  to 
normal  conditions. 

Every  man  and  every  business  has  felt  the  reaction 
of  war  and  likewise  will  feel  the  effects  of  the  settling 
to  normal  peace  economics.  The  heritage  of  the  war 
is  an  enormous  debt  upon  which  taxes  must  be  paid. 
To  meet  these  obligations  of  the  Government  to  our- 
selves as  citizens  of  the  nation,  is  a  problem  in  taxa- 
tion that  will  require  the  expert  thought  of  trained 
minds  conversant  with  natural  and  manufactured  pro- 
duction. Money  is  valuable  to  the  state  only  while 
in  circulation,  and  legislation  or  taxation  that  impedes 
its  movement  in  trade  will  retard  its  return  to  normal 
values. 

The  danger,  in  the  processes  at'  work,  is  radicalism, 
expediency,  and  ill  advised  control,  by  edict,  legisla- 
tion, or  misinterpretation  of  power.  Grave  questions 

v 


vi  Introduction 


of  the  rights  of  individuals  and  commonwealths  rise 
up  on  the  horizon. 

Living  under  a  Republic  and  prospering  by  its 
fundamentals,  the  citizen  is  tenacious  in  his  beliefs  that 
even  the  emergency  of  war  must  not  violate  his  guaran- 
ties as  a  unit  of  that  Democratic  form  of  government. 
It  would  be  a  hazardous  undertaking  to  long  deny  a 
citizen  the  rights  of  free  speech ;  it  will  be  an  ill  con- 
sidered policy  to  invade  the  proprietary  rights  of  in- 
dustry ;  it  would  be  a  short-sighted  policy  to  attempt  to 
"fix"  the  price  of  labor. 

In  any  scheme  of  reconstruction  there  must  be  con- 
sidered mass  power,  easily  translated  into  force,  and 
there  must  be  considered  the  personality  of  wealth, 
embodied  in  finance,  manufacturing,  real  estate,  and 
commercial  undertakings  of  all  kinds  on  land  and  sea 
at  the  closing  hour  —  the  hour  of  payment ;  for  wealth, 
active  capital,  earning  power  must  pay  the  taxes  of  war, 
whether  from  savings  of  earnings  or  from  increased 
charges  for  product  and  labor,  passed  on  to  the  consumer. 

In  between  these  two  always  rival  forces  of  citizenry 
there  is  a  mean  which  reconstruction  must  approach. 
Man  is  instinctively  self-preserving,  except  under  the 
spell  of  an  exalted  emotion,  and  in  this  critical  scramble 
for  a  restoration  of  processes,  he  will  seek  to  save  his 
own  hide  first.  As  a  result  there  come  unfair  practices 
and  abnormal  prices  —  whether  for  commodities  or 
labor.  They  rise  and  fall  together  under  normal  con- 
ditions—  to-day  they  are  unstable,  often  "set,"  and 
do  not  reflect  earning  power  and  purchasing  power. 

It  is  the  problem  of  reconstruction  to  create  the  vehicle 
of  approach,  and  in  the  process  true  economics  must  be 


Introduction  vii 


restored.  The  process  will  require  great  skill  as  to 
methods  and  great  compromises  in  position.  Other- 
wise, the  inflated  dollar  will  be  a  bubble  easily  exploded 
to  the  disaster  of  all,  or  hie  itself  away  to  foreign  lands 
for  investment. 

Why  and  what  must  we  reconstruct? 

That  a  considerable  reconstruction  is  inevitable 
hardly  need  be  emphasized.  That  too  much  recon- 
struction be  attempted  is  one  of  the  dangers  of  a  chang- 
ing viewpoint  of  public  opinion.  There  is  a  proverb 
about  putting  new  wine  in  old  bottles.  Real  American 
ideals  —  those  of  Washington,  Jefferson,  Lincoln  —  have 
not  changed.  The  Constitution  is  not  a  scrap  of  paper, 
and  long-established  customs  are  not  easily  supplanted 
by  theoretical  replacements.  The  United  States  is 
not  in  danger  of  too  little  reconstruction,  but  is  gravely 
threatened  by  too  much.  By  reconstruction  I  do  not 
refer  to  the  physical  aspects.  We  have  not  been  broken 
under  the  heel  of  warfare.  We  do  not  need  rebuilding. 
Our  government  has  not  changed  form  in  the  throes  of 
conflict. 

What  then  are  the  problems  of  reconstruction  that 
are  disturbing  and  threatening  the  stability  of  our 
Republic?  What  do  we  face  in  the  next  two  years 
that  calls  for  immediate  attention  and  thoughtful 
consideration  —  and  action  ? 

First  let  us  glance  at  the  fundamentals.  War  ne- 
cessity has  upset  the  usual  order,  abrogated  the  normal 
and  legal  status  of  business.  Economic  laws  have  been 
overturned  under  the  pressure  of  emergency  and  statutes 
have  been  set  aside  to  speed  up  the  functioning  of  pro- 
duction and  transportation.  And  what  is  the  most 


viii  Introduction 


serious  upheaval  and  the  one  hardest  to  restore  to  pre- 
war conditions  is  the  attitude  of  labor  —  all  labor. 
And  as  labor  is  affected  so  are  all  the  products  of  labor 
and  the  attendant  values,  both  in  relation  to  itself 
and  its  products.  Labor  is  on  a  strike.  It  is  not  a 
local  condition  —  it  is  manifest  in  every  section  of  the 
country  in  swift  recurrence.  Labor  is  striking  for 
various  economic  reasons,  —  more  or  less  as  a  result 
of  war  inflation  and  to  a  considerable  extent  coincident 
with  the  conflict  evident  in  the  settling  process,  incident 
to  after-war  conditions. 

The  war  period  has  been  labor's  opportunity.  Wages 
bore  no  relation  to  services,  in  terms  of  normal  measure- 
ment. Labor  was  the  prime  essential  and  at  any  price. 
The  increasing  scarcity  of  commodities,  due  to  the  war 
draft  upon  essentials,  put  prices  on  the  top  shelf.  Labor's 
high  wage  was  not  sufficient.  The  decreasing  pur- 
chasing power  of  the  dollar  cut  down  the  purchasing 
power  of  Labor's  inflated  dollar.  Labor  struck  on  - 
in  most  instances  it  did  not  need  to  even  strike  to  gain 
its  advance.  And  now  Labor  is  militant  in  its  desire  to 
hold  its  war-gained  advantage,  while  production  slackens 
with  the  lessening  demand  for  war  essentials. 

Here  we  find  every  element  of  clash ;  the  throes 
through  which  labor  and  capital  must  pass  in  their 
struggle  to  operate  —  for  neither  can  succeed  without 
the  other,  in  the  last  analysis  —  cooperatively.  This 
is  one  of  the  most  serious  and  by  all  degrees  the  great 
fundamental  problem  in  economic  reconstruction.  It 
affects  every  artery  of  our  social  and  business  life  and 
concerns  itself  with  our  political  future.  In  its  struggle 
are  elements  as  fraught  with  peril  as  ever  confronted 


Introduction  ix 


this  nation.  There  are  bound  to  be  offered  untried 
schemes  to  meet  this  great  question,  and  to  placate  the 
hysteria  of  the  moment.  On  the  other  hand,  American 
business,  recognizing  the  extraordinary  and  inflated 
condition  of  values,  is  offering  various  solutions  to 
readjust  and  reconstruct  a  working  basis  between 
itself  and  its  man  power. 

Big  business  is  conciliatory  and  offers  partial  partici- 
pation in  profits,  representation  in  management,  and 
certain  forms  of  recognition  of  the  unionization  of  labor. 
Into  this  conflict  has  sprung  a  form  of  socialistic  propa- 
ganda, and  Bolshevism  —  a  form  of  anarchy,  a  weapon 
of  unrest  and  unemployment,  in  its  American  interpre- 
tation. 

To  offset  and  appease  labor  and  its  spokesmen  the 
Government  at  Washington  is  reaching  far.  It  is  en- 
couraging a  sort  of  socialism  and  paternalism,  hereto- 
fore unknown  in  our  administration  of  national  affairs. 
Here  arise  problems  to  be  threshed  out  by  the  people. 
Questions  of  Government  control  and  ownership  pro- 
trude themselves  into  the  period  of  reconstruction. 

Intimately  associated  with  questions  of  government 
reach  are  vital  issues  of  finance,  of  administration,  of 
credits,  of  possible  deficits  to  increase  the  burden  of 
taxation,  and  the  invasion  of  private  rights  of  vested 
interest  in  privately  established  businesses  —  whether 
the  small  retailer  or  the  holder  of  public  franchises. 

These  are  reconstruction  questions  that  concern  at 
least  the  temporary  period  of  readjustment  through 
which  we  must  pass  in  the  coming  two  or  three  years. 

The  world  has  been  upset,  the  balance  of  trade  no 
longer  exists,  protective  tariffs,  embargoes,  and  the 


Introduction 


carrying  trade  of  the  world  have  been  affected.  We 
cannot  escape  the  international  aspect  of  trade  condi- 
tions. 

And  with  that  thought  in  view  we  must  put  our  own 
house  in  order.  The  war  has  brought  home  to  us  the 
importance  of  the  homogeneity  of  our  people  as  a  nation. 
Our  polyglot  citizenry  must  be  Americanized.  The 
conflicting  social  elements,  dissociated  foreign  character- 
istics, and  alien  tongues  under  our  flag  must  be  welded 
by  the  spirit  of  patriotism  in  a  common  thought  for 
national  unity.  It  is  a  big,  vital  issue  of  reconstruc- 
tion. 

We  are  in  the  throes  of  a  new  order,  conscious  of  a 
new  spirit  of  toleration  and  mutual  interest  for  a  greater 
period  of  betterment  in  conditions  of  life  and  business. 

The  war  has  clearly  given  us  the  vision  of  the  obsolete. 
Certain  old  forms  of  personal  attitude  will  no  longer 
work.  The  arrogance  of  wealth,  the  militant  resistance 
of  labor,  will  no  longer  prevail.  Cooperation  and  con- 
sideration are  coming  into  the  fore  of  industry. 

These  are  not  idealistic  dreams,  nor  can  they  be  solved 
by  idealistic  propagandas.  Sound  sense  and  a  leaguing 
of  interests  must  be  the  practical  method  of  a  closer 
approach. 

Americans  are  too  frequently  susceptible  to  hysteria ; 
conglomerate  and  liberty-loving,  there  is  danger  of  an 
uncontrolled  spirit  running  amuck,  in  politics,  in  govern- 
ment, in  social  reorganization.  Phrase  and  idealism 
have  run  rampant  in  this,  the  new  peace  period  after 
the  hard  hand  of  war  repression.  But  the  settling  proc- 
esses are  at  work.  The  Government  is  retracting  and 
modifying  some  positions  considered  fatal  to  our  funda- 


Introduction  xi 


mental  principles.  Labor,  while  seeking  to  hold  to 
its  objectives,  has  listened  to  mediatory  counsel.  Busi- 
ness and  finance  have  reached  forward  eagerly  for  an 
adjustment  and  a  sound  basis  of  continuance  of  the 
prosperity  the  country  has  fallen  heir  to. 

And  now  into  this  crucible  comes  the  melting  of 
many  minds.  Our  nation  is  thinking  and  our  articu- 
late voices  are  speaking.  Thoughtful  minds  are  seeking 
a  solution  of  our  problems.  Out  of  it  all  the  Great 
American  Mind  will  crystallize  into  definite  public 
opinion.  The  false  will  be  repudiated  and  the  sound 
will  prevail.  Just  what  new  forms  our  public  and 
private  functions  of  social,  economical,  political,  and 
commercial  life  will  take,  who  can  tell?  But  if  no 
grave  mistake  is  made  by  those  now  in  power,  no  hys- 
terical panacea  is  superimposed  upon  the  will  of  the 
people,  no  ill  advised  partisan  legislation  is  forced,  a 
solution  of  our  problems  will  come  from  the  saner, 
more  constructive  thought  of  our  better  thinkers.  To 
them  we  must  look  for  guidance.  In  this  volume  I 
have  sought  to  bring  together  the  opinions  and  views 
of  those  who  command  the  nation's  respect,  for  to 
them  we  may  properly  lend  audience  to  stabilize  and 
formulate  our  own  thoughts  and  stimulate  intellectual 
force  into  concrete  action,  for  the  unification  of  the 
common  mind  upon  these  all-concerning  problems  of 
America's  reconstruction. 

EDWIX  WILDMAN, 

Editor  of  The  Forum. 


CONTENTS  ; 

PAGE 

INTRODUCTION v 

BY  EDWIN  WILDMAN,  editor  of  "The  Forum,"  author 
of  "Aguinaldo." 

I.    THE  BASIS  FOR  CONSTRUCTIVE  SETTLEMENTS      .        i 
The  Great  Day  of  Settlement,  by  President  Wilson. 
What  Does  Reconstruction  Mean?    by  ex-Senator 

J.  Hamilton  Lewis. 
Reconstruction  Needs  in  our  Democracy,  by  Senator 

Charles  S.  Thomas. 
International  Reconstruction  through  the  League 

of  Nations,  by  Hon.  William  Howard  Taft. 

II.    GOVERNMENT  AND  BIG  BUSINESS          ...      30 
Dangers  in  Autocratic  Authority  and  Government 

Ownership,  by  Senator  James  E.  Watson    . 
Economic   Aspects   of   Peace   Readjustments,    by 

Hon.  Charles  Evans  Hughes. 

III.  PROBLEM  OF  THE  RAILROADS  —  FROM  THE  GOV- 
ERNMENT'S VIEWPOINT 46 

Some  New  Railroad  Policy  Needed,  by  President 
Wilson. 

The  Administration  Five- Year-Extension  Plan,  by 
Hon.  William  G.  McAdoo. 

Private  Ownership  under  Close  Federal  Control 
after  Five  Years,  by  Director-General  Hines  of 
the  Railroad  Administration. 

Railroad  Earnings  in  1918  Show  Big  Decrease. 


xiv  Contents 


PAGE 


IV.    EXPERT  OPINION  ON  THE  RAILROAD  QUESTION    .      55 

Why  the  Roads  Cannot  be  Turned  Back,  by  Con- 
gressman Simeon  D.  Fess. 

Consolidate  the  Railroads  according  to  Traffic 
Regions,  by  Frank  A.  Vanderlip. 

Government  Ownership  a  Detriment,  by  Otto  H. 
Kahn. 

Advice  of  the  Association  of  American  Railway 
Executives,  by  T.  DeWitt  Cuyler. 

Evils  of  "Regional  Grouping,"  by  Julius  Krutt- 
schnitt. 

Private  Ownership  Most  Economical,  by  Theodore 
Perry  Shonts. 

A  Federal  Trunk-Line  System,  by  Hon.  William 
Jennings  Bryan. 

Receiverships  for  Many  Roads  if  Government  Re- 
linquishes Control,  by  N.  L.  Amster. 

Government  Operation  Distasteful  to  Shippers,  by 
Clifford  Thorne. 

V.    PUBLIC  CONTROL  OF  WIRE  COMMUNICATIONS       .      84 

Why  the  Government  Should  Keep  the  Wires,  by 
Hon.  Albert  Sidney  Burlcson,  Postmaster-General. 

Should  the  Government  Own  the  Telegraphs?  by 
Clarence  H.  Mackay. 

Mr.  Mackay's  letter  to  Congress. 

VI.    CONSTRUCTIVE  FINANCE 112 

Some  Phases  of  Financial  Reconstruction,  by  Paul 
M.  Warburg. 

The  Decline  in  Value  of  Gold:  America's  Opportu- 
nity for  Banking  Leadership,  by  A.  C.  Miller. 

Vast  Foreign  Indebtedness  to  America  —  How 
Can  it  Be  Liquidated  ?  by  Thomas  W.  Lamont. 

Must  the  War-Stricken  Nations  Pay  their  Debts 
to  us  —  How  ?  by  George  E.  Roberts. 


Contents  xv 

PAGE 

Business  Outlook,  Labor  Problem  and  Motor-Car 

Industry,  by  John  North  Willys. 
Foreign  Loans  in  the  United  States. 

VII.    BANKING  AND  CREDITS 143 

Developing  the  American  Acceptance  Market,  by 

W.  P.  G.  Harding. 

Value  of  Cumulative  Effort,  by  Paul  M.  Warburg. 
Usury   and   the   Banks,   by   Hon.   John    Skelton 

Williams. 

VIII.    THE  PROBLEM  OF  PAYING  OUR  WAR  DEBT         .    155 
Who  Will  Pay  the  Taxes?  by  Frank  H.  Sisson. 
This  Generation  Must  Pay  the  Cost  of  War,  by 

Professor  C.  C.  Arbuthnot. 
How  we  Must  Pay  Costs  of  War,  by  Professor  Irving 

Fisher. 

IX.    BUSINESS  AND  FOREIGN  TRADE  AFTER  THE  WAR    176 
The  Foreign  Trade  Outlook,  by  James  A.  Farrell. 
Rebuilding  our  Foreign  Trade,  by  Hon.  William  C. 

Redfield. 
The  Ideals  of  American  Business,  by  Harry  A. 

Wheeler. 
American  Attitude  on  Treaty  Readjustments,  by 

Fred  Brown  Whitney. 
New  Pan-America  Grows  from  War,  by  Hon.  John 

Barrett. 

X.    BRIDGING    THE    GULF    BETWEEN    CAPITAL    AND 

LABOR 208 

The  Four  Partners  in  Industry,  by  John  D.  Rocke- 
feller, Jr. 

XI.    CAPITAL  AND  LABOR  AFTER  THE  WAR.        .        .222 
After- War  Labor  Questions  —  Wages  and  Prices, 

by  Elbert  H.  Gary. 
Labor  to  Rule  the  World,  by  Charles  M.  Schwab. 


xvi  Contents 

PAGE 

Labor's  Golden  Age  Here,  by  Hon.  Josephus 
Daniels. 

American  Common  Sense  toward  Capital  and 
Labor,  by  James  Speyer. 

An  Autocracy  of  Anarchy  Impending,  by  Hon. 
William  B.  Wilson. 

The  Federal  Employment  Service,  by  Henry  Bruere. 

New  Labor  Ideas  Taught  by  War,  by  Felix  Frank- 
furter. 

A  Movement  of  "Constructive  Character,"  by 
Samuel  Gompers. 

XII.    IMMIGRATION  AND  THE  PROBLEM  OF  WOMEN  IN 

INDUSTRY 247 

Need  we  Fear  Immigration?  by  Hon.  Anthony 
Caminetti. 

Closing  the  Door  to  Bolshevism  and  Anarchy.  Re- 
port of  Congressional  Committee  on  Immigration 
and  Naturalization. 

After-War  Status  of  Women  Workers,  by  Miss 
Mary  Van  Kleeck. 

XIII.    BOLSHEVISM  —  WHAT  IT  Is 264 

The  United  States  No  Anarchist  Cafe,  by  Vice- 

President  Marshall. 
The  Red  Flag  of  Bolshevism,  by  Senator  James  A. 

Reed 
What  is  Bolshevism  in  America?  by  Lewis  Allen 

Browne. 

Growing  Menace  of  the  I.  W.  W.,  by  Lynn  Ford. 
Bolshevism    "Autocracy's    Twin    Brother,"    by 

Charles  Edward  Russell. 
The  Disease  of  Bolshevism,  by  the  Marquis  Okuma.' 

XIV.    OUR  MERCHANT  MARINE 281 

Xcw  Shipping  Era,  by  Hon.  Edward  X.  Hurley. 
Workings  of  the  Emergency  Fleet  Corporation,  by 
Charles  Piez. 


Contents  xvii 

PAGE 

Our  Merchant  Marine  and  Railroads,  by  Hon. 
William  G.  McAdoo. 

XV.    THE  AGRICULTURAL  OUTLOOK      ....    309 
Our  Food  Production,  Prices,  and  Distribution,  by 

Hon.  David  F.  Houston. 
Opportunities   for  Profitable   Farming,   by  Hon. 

William  G.  McAdoo. 
The  Food  Problem  a  Problem  for  the  American 

Farmer,  by  Hon.  Herbert  C.  Hoover. 
Operations  by  the  Federal  Land  Banks,  by  Hon. 

Carter  Glass. 

XVI.    DEMOBILIZATION  AND  UNEMPLOYMENT  .        .        .329 
Government  Farm  Plan  to  Help  Soldiers,  by  Hon. 

Franklin  K.  Lane. 
Rebuilding  the  Injured  Soldier,  by  Hon.   Hoke 

Smith. 

The  Problem  of  the  Demobilized  Workers,  by  Sen- 
ator John  Wingate  Weeks. 

XVII.    WHERE  AMERICAN  EDUCATION  HAS  FAILED         .    348 
Defects  in  American  Education  Revealed  by  the 

War,  by  Charles  W.  Eliot. 
Education  after  the  War,  by  Nicholas  M.  Butler. 

XVIII.    MILITARY  TRAINING  AND  PREPAREDNESS      .        .    369 
Is  a  Permanent  Military  Machine  Necessary?  by 

Senator  George  Earl  Chamberlain. 
Colleges  Should  Continue  Military  Training,  by 

Elmer  Ellsworth  Brown  and  A.  Lawrence  Lowell. 
Military    Preparedness    the    Best    Guarantee    of 

Peace,  by  ex-Senator  George  Sutherland. 

XIX.    PROBLEM  OF  AMERICANIZATION     ....    386 
The  Need  of  a  Definite  Program  of  Americaniza- 
tion of  our  Foreign-born  People,  by  Hon.  Frank- 
lin K.  Lane. 


xviii  Contents 

PACK 

Americanization  Defined,  by  Ralph  Peters. 
The  Smith-Bankhead  Americanization  Bill. 

XX.    PROHIBITION  AND  THE  PEOPLE     .        .        .    '    .    396 
The  Prohibition  Amendment  and  State  Rights,  by 

William  H.  Hirst. 
Prohibition    .  Glaring   Error,  by  Senator   Henry 

Sage. 
"Drys"  a  Menace  to  the  Republic,  by  Henry  Wat- 

terson. 

XXI.    THE     GOVERNMENT'S    RECONSTRUCTION     PLANS 

UNDER  THE  COUNCIL  OF  NATIONAL  DEFENSE    .    411 

INDEX  ,  419 


LIST   OF   ILLUSTRATIONS 

PACE 

PRESIDENT  WOODROW  WILSON  (See  page  2)  Frontispiece 

HON.  WILLIAM  HOWARD  TAFT 20 

HON.  CHARLES  EVAN  HUGHES 38 

JOHN  D.  ROCKEFELLER,  JR 208 

CHARLES  M.  SCHWAB          .     ..; 225 

SAMUEL  GOMPERS 245 

HON.  WILLIAM  G.  McAooo 307 

SENATOR  JOHN  WINGATE  WEEKS  .      .     ..     .     .      .341 


RECONSTRUCTING  AMERICA 

CHAPTER  1 
THE   BASIS  FOR   CONSTRUCTIVE   SETTLEMENTS 

PRESIDENT  WILSON,  in  consonance  with  his  declared 
purpose  in  going  abroad  to  "translate  into  action  the 
great  ideals  for  which  America  has  striven,"  took  for 
his  theme,  at  Manchester,  England,  the  community 
of  interest  —  partnership  of  right  —  between  America 
and  Europe.  He  said  in  part : 


THE  GREAT  DAY  OF  SETTLEMENT 

BY  PRESIDENT  WILSON 

It  does  seem  to  me  that  the  theme  that  we  must 
have  in  our  minds  now  in  this  great  day  of  settlement  is 
the  theme  of  common  interest  and  the  determination 
of  what  it  is  that  is  our  common  interest.  You  know 
that  heretofore  the  world  has  been  governed,  or  at  any 
rate  the  attempt  has  been  made  to  govern  it,  by  part- 
nerships of  interest,  and  that  they  have  broken  down. 
Interest  does  not  bind  men  together.  Interest  separates 
men.  For  the  moment  there  is  the  slightest  departure 
from  the  nice  adjustment  of  interests  then  jealousies 
begin  to  spring  up.  There  is  only  one  thing  that  can  bind 
peoples  together,  and  that  is  common  devotion  to  right. 

Ever  since  the  history  of  liberty  began  men  have 


Reconstructing  America 


talked  about  their  rights,  and  it  has  taken  several  hun- 
dred years  to  make  them  perceive  that  the  principal 
condition  of  right  is  duty,  and  that  unless  a  man  per- 
forms his  full  duty  he  is  entitled  to  no  right.  It  is  a 
fine  correlation  of  the  influence  of  that  duty  that  right 
is  the  equipoise  and  balance  of  society. 

A   PARTNERSHIP    OF   RIGHT 

And  so,  when  we  analyze  the  present  situation  and 
the  future  that  we  now  have  to  mold  and  control,  it 
seems  to  me  there  is  no  other  thought  than  that  that 
can  guide  us.  You  know  that  the  United  States  has 
always  felt  from  the  very  beginning  of  her  story  that 
she  must  keep  herself  separate  from  any  kind  of  connec- 
tion with  European  politics.  I  want  to  say  very  frankly 
to  you  that  she  is  not  now  interested  in  European  poli- 
tics, but  she  is  interested  in  the  partnership  of  right 
between  America  and  Europe.  If  the  future  had  noth- 
ing for  us  but  a  new  attempt  to  keep  the  world  at  a 
right  poise  by  a  balance  of  power,  the  United  States 
would  take  no  interest,  because  she  will  join  no  com- 
bination of  power  which  is  not  a  combination  of  all  of 
us.  She  is  not  interested  merely  in  the  peace  of  Europe, 
but  in  the  peace  of  the  world. 

Therefore  it  seems  to  me  that  in  the  settlement  which 
is  just  ahead  of  us  something  more  delicate  and  difficult 
than  was  ever  attempted  before  has  to  be  accomplished 
—  a  genuine  concert  of  mind  and  of  purpose.  But 
while  it  is  difficult,  there  is  an  element  present  that 
makes  it  easy.  Never  before  in  the  history  of  the 
world,  I  believe,  has  there  been  such  a  keen  international 
consciousness  as  there  is  now. 


The  Basis  for  Constructive  Settlements     3 

THE  MANDATE   OF  HUMANITY 

There  is  a  great  voice  of  humanity  abroad  in  the 
world  just  now  which  he  who  cannot  hear  is  deaf. 
There  is  a  great  compulsion  of  the  common  conscience 
new  in  existence  which  if  any  statesman  resist  will 
gain  for  him  the  most  unenviable  eminence  in  history. 
We  are  not  obeying  the  mandate  of  parties  or  of  politics. 
We  are  obeying  the  mandate  of  humanity. 

That  is  the  reason  why  it  seems  to  me  that  the  things 
that  are  most  often  in  our  minds  are  the  least  significant. 
I  am  not  hopeful  that  the  individual  items  of  the  settle- 
ment which  we  are  about  to  attempt  will  be  altogether 
satisfactory.  One  has  only  to  apply  his  mind  to  any 
one  of  the  questions  of  boundary  and  of  altered  sov- 
ereignty and  of  racial  aspirations  to  do  something  more 
than  conjecture  that  there  is  no  man  and  no  body  of 
men  who  know  just  how  they  ought  to  be  settled,  and 
yet  if  we  are  to  make  unsatisfactory  settlements  we 
must  see  to  it  that  they  are  rendered  more  and  more 
satisfactory  by  the  subsequent  adjustments  which  are 
made  possible.  We  must  provide  the  machinery  for 
readjustments  in  order  that  we  have  the  machinery  of 
good  will  and  friendship. 

II 

WHAT  DOES  RECONSTRUCTION  MEAN? 

BY  EX-SF.N-ATOR  J.   HAMILTON   LEWIS 

So  much  depends  upon  how  we  apply  the  English  lan- 
guage, how  much  reliance  can  be  placed  upon  the  uses 
of  words,  that  as  we  approach  the  interesting  phases  of 


Reconstructing  America 


world  reconstruction  we  must  not  forget  that  we  also 
approach  the  language  of  world  diplomacy.  Diplomacy 
is  constructive,  not  reconstructive,  because  if  it  were 
otherwise  it  would  become  too  complicated  for  treaty 
purposes. 

The  chief  thought  of  our  reconstruction  in  this  country 
carries  with  it  no  secret  advantage.  It  has  above  all 
other  qualities  a  hope  for  intelligent  results.  No  appeal 
to  American  intelligence  is  ever  wasted,  and  therefore, 
divested  of  the  difficulties  of  natural  sentiment  which  is 
involved  in  the  task  of  reconstruction,  the  Americans 
have  only  to  protect  their  intelligence.  This  they  have 
always  done,  and  there  is  no  reason  to  expect  that 
they  have  lost  the  gift.  However,  the  length  and  signi- 
ficance of  the  word  "reconstruction"  itself  permits 
speculation.  There  are  questions  to  be  answered  that 
are  almost  intangible.  For  instance,  one  of  them  is, 
"What  is  there  in  this  country  to  reconstruct?  " 

There  is  really  nothing.  The  return  of  the  men 
from  the  front  should  bring  no  greater  surprise  or  effect 
upon  the  existing  order  of  business  than  when  soldiers 
came  back  from  Mexico,  or  from  Cuba.  The  war 
has  not  done  actual  damage  to  our  country,  as  it  has 
in  Europe.  Our  fields  are  protected,  our  houses  arc 
intact,  our  industries  have  increased  their  efficiency  if 
anything  throughout  the  war.  In  spite  of  our  business 
sacrifices  we  have  loaned  enormous  sums  to  our  neighbors 
across  the  water,  and  we  have  more  to  spare  ourselves 
than  we  ever  had  before.  The  casual  observer  look- 
ing over  this  land  of  liberty  sees  no  outward  signs  of 
things  to  reconstruct.  And  yet  he  is  impressed  with 
the  necessity  of  reconstruction.  Of  course  he  is. 


The  Basis  for  Constructive  Settlements     5 

We  have  emerged  from  this  war  with  a  realization 
that  there  is  new  blood  among  us,  we  feel  the  stir  of  a 
vast  responsibility  to  that  new  blood.  Our  territories 
seem  to  be  extended,  our  system  of  trade  needs  changes 
to  meet  the  larger  growth,  our  senses  are  tingling  with 
a  duty  of  neighborly  obligation  that  will  adapt  them- 
selves to  the  common  interests  of  humanity. 

"RECONSTRUCTION"  MUST  BE  ASSOCIATED  WITH  EUROPE 

There  is  some  meaning  to  this  word  "reconstruction," 
and  yet  how  are  we  going  to  grasp  it  without  business 
changes  being  involved,  without  our  national  character 
being  challenged  ? 

It  has  a  far  greater  meaning  to  the  devasted  regions 
of  Europe  than  it  has  to  us.  It  affects  us  only  in  our 
coming  relation  with  the  people  of  the  old  world,  because 
of  them  we  are  involved  in  the  meaning  of  the  word. 
Europe  lies  charred,  torn,  bleeding  from  the  disaster 
of  the  war.  To  the  Americans  reconstruction  must 
therefore  be  associated  with  Europe.  We  are  in  the 
position  to-day  of  a  creditor  nation  to  Europe ;  we  are  not 
only  bound  to  the  welfare  of  the  old  world  by  ties  of  hu- 
manity but  by  ties  of  economic  interest.  The  war  has 
brought  us  into  new  forms  of  industrial  problems,  from 
which  we  can  profit  only  if  we  demonstrate  a  far-sighted 
patience,  only  if  we  moderate  our  business  habits  with 
conciliatory  sentiments  for  a  bankrupt  people. 

To  visualize  better  the  nature  of  the  word  reconstruc- 
tion as  it  affects  our  relation  with  the  war-stricken  coun- 
tries, we  might  say  that  as  a  nation  we  hold  an  immense 
mortgage  on  Europe. 


6  Reconstructing  America 

WE  MUST  MAKE  GOOD  OUR  MORTGAGE  ON  EUROPE 

It  would  be  very  shortsighted  for  us  to  wish  to  fore- 
close upon  a  property  that  was  already  destroyed  when 
by  just  and  careful  management  we  can  enable  Europe 
to  pay  the  obligation  of  that  mortgage.  That  is  one 
of  our  chief  tasks  in  reconstruction. 

As  to  Europe,  our  prospect  of  reconstruction  involves 
faith  in  our  investment,  an  attitude  of  helpful,  patient, 
indomitable  trust  in  it.  Just  now  there  is,  perhaps, 
no  thought  of  this  phase  of  our  relations  to  Europe, 
because  we  are  absorbed  with  the  horror  of  those  who 
are  suffering  there,  of  sympathy  with  the  political 
change  of  heart  that  has  seized  all  Europe,  with  our 
natural  understanding  of  the  shock  that  has  temporarily 
disturbed  the  economic  character  of  Europe. 

In  the  meaning  of  the  word  reconstruction  there  lies 
also  the  purpose  of  business  stability,  of  restored  trade,  of 
an  equitable  balance  of  merchant  life.  It  will  be  some 
time  before  this  balance  can  be  reached,  and  no  impa- 
tience of  profiteering,  of  anxiety  for  the  future,  of 
scrambling  by  competitive  methods  will  bring  it  about. 
Behind  the  true  meaning  of  the  word  reconstruction 
lies  the  large  stride  of  the  nations  abroad,  for  upon  the 
political  decisions,  upon  the  adjustment  of  religious 
differences,  upon  the  softening  of  the  passions  and  senti- 
ments that  have  been  roiled  up  by  the  storms  of  war, 
depends  the  economic  settling  of  affairs.  What  we 
must  do  at  once  is  to  tighten  the  bonds  of  friendship 
that  unite  us,  to  assist  the  distress,  to  enable  the  wounded 
economic  conditions  in  Europe  to  return  to  normal. 
If  the  word  reconstruction  is  to  remain  in  our  thought 


The  Basis  for  Constructive  Settlements     7 

as  a  pivot  of  opinion  upon  which  we  measure  the  rights 
and  the  wrongs  of  our  future  transactions  with  Europe, 
it  must  be  considered  with  the  utmost  confidence  by 
us.  Our  ability  and  our  confidence  must  be  in  ac- 
cord in  trade,  to  resume  our  relations  with  European 
industries  upon  a  far  more  prosperous  basis  than  we 
have  ever  had  before.  That,  to  my  mind,  is  our  course 
of  reconstruction  in  Europe. 

WHAT  WE   MUST  DO   IN  AMERICA  —  AND  ABROAD 

As  to  America.  As  I  have  said,  there  is  no  internal 
reconstruction  of  a  reactionary  nature  necessary.  I  am 
not  assuming  that  political  rumors  of  vast  changes 
will  occur.  I  am  assuming  that  we,  and  this  country, 
are  economically  so  safe  and  sound  that  in  our  personal 
exchange  of  business  we  have  only  to  go  ahead.  Our 
roads  are  open,  our  industries  are  solvent,  our  homes 
are  in  order,  our  money  is  well  invested,  we  are  ourselves 
well  off.  The  matters  that  may  come  under  our  inter- 
pretation of  reconstruction  concern  our  temptation  to 
impose  barricades  in  trade.  This  we  must  not  do. 
We  must  see  that  we  maintain  a  delicate  balance  in 
exports  and  imports.  We  must  not  take  advantage  of 
the  necessities  of  others  now,  lest  later  on  when  the 
new  social  order  has  come  about  they  take  a  similar 
advantage.  We  must  nurse  our  foreign  trade,  we  must 
look  far  ahead.  With  the  political  trend  of  the  world 
towards  republics  we  shall  one  day  be  one  vast  people 
on  this  earth  dealing  directly  with  one  another.  It  is 
obvious  that  former  standards  of  competition  will  be 
exposed  to  ruthless  scrutiny.  The  merchants  of  the 
world  will  supply  each  other  according  to  the  will  of 


8  Reconstructing  America 

the  people  they  sell  to,  because  there  will  be  an  end  to 
preferred  groups,  to  organized  trade  in  corners.  It  is 
hopeful  to  believe  that  we  shall  have  to  reconstruct  our 
ideas  of  commercial  value ;  if  we  do  not,  if  we  are  not  in 
accord  with  the  new  order  of  social  conditions,  we  shall 
foster  a  boomerang  in  any  effort  we  make  to  centralize 
our  trade  advantages. 

A  WORLD   CONSCIENCE   IN  TRADE 

Of  course  these  are  questions  of  reconstruction,  but 
they  are  in  final  analysis  really  matters  of  construction 
which  this  great  war  has  helped  bring  about.  The  prod- 
ucts of  the  earth  will  be  for  all  the  people,  not  for  the 
few,  but  they  will  not  be  distributed  according  to  radical 
dreams.  They  will  pursue  the  present  course  of  value 
for  value,  but  the  values  will  be  closer  to  a  true  valua- 
tion. By  degrees  the  balance  of  affairs,  enormously 
extended,  vastly  simplified  in  trade,  will  rise  to  a  grand 
level  of  equality.  Merchants  will  deal  with  each  other 
without  suspicion  because  there  will  be  nothing  to 
suspect.  The  republics  of  the  world  will  dominate  the 
conscience  of  trade. 

As  to  the  armies  and  navies  of  the  world,  they  will  be 
maintained,  but  upon  a  new  order  of  reconstruction 
they  will  operate  in  accord  with  the  neighborly  obliga- 
tions of  their  duties.  They  will  not  be  in  conflict,  they 
will  be  in  unison.  Instead  of  being  a  menace  to  the 
safety  of  the  people  they  will  be  their  security. 

Thus  we  have  the  three  corners  of  the  world's  triangle, 
the  pedestal  upon  which  the  proposed  reconstruction 
of  the  world  will  stand.  Above  all  things  it  is  an  issue 
of  financing.  If  the  financing  is  wisely  done,  well  and 


The  Basis  for  Constructive  Settlements     9 

good  ;  if  it  is  not,  the  consequences  will  be  serious.  But 
I  believe  that  in  any  event  it  will  not  be  reconstruction, 
it  will  be  construction. 

Ill 

RECONSTRUCTION  NEEDS  IN  OUR  DEMOCRACY 

BY  SENATOR  CHARLES  S.  THOMAS 

What  is  Democracy?  Democracy  is  not  militarism 
nor  anarchy.  It  is  not  socialism  nor  lawlessness. 
It  does  not  confer  absolute  freedom,  for  that  is  incon- 
sistent with  equality  of  right.  It  does  not  require  a 
Republic,  for  the  developments  of  its  principles  are 
strangers  to  many  of  them  while  the  blessings  are 
enjoyed  by  the  subjects  of  many  Monarchies. 

Democracy  is  synonymous  with  ordered  liberty  which 
respects  and  safeguards  the  rights  of  all.  Its  congenial 
structure  is  Republicanism,  and  Elihu  Root  has  finely 
said  that  Republican  government  is  organized  self- 
control.  Henry  Ward  Beecher  declared  the  real  demo- 
cratic idea  to  be  not  that  every  man  should  be  on  the 
level  with  every  other,  but  that  every  one  shall  have 
liberty  without  hindrance  to  be  what  God  made  him. 
Any  condition  interfering  with  this  conception  is  an 
unhealthy  one.  It  may  be  deemed  essential  to  class 
interest  but  it  is  not  Democratic. 

Democracy  finds  its  natural  expansion  in  social,  eco- 
nomic, and  political  development.  From  the  friction 
thus  engendered  come  the  ills  which  threaten  its  integrity. 
These  lines  of  development  must  now  pass  through  a 
period  of  readjustment  before  they  again  become 
normal. 


10  Reconstructing  America 

Perhaps  the  most  insidious  danger  to  Republican 
institutions  is  the  indifference  of  the  citizen  to  his  public 
duties.  The  beneficiaries  of  free  government  become 
indulgent  and  comfortable ;  their  responsibilities  grow 
irksome  and  annoying.  Their  vigilance  relaxes  in  their 
struggle  for  material  things.  Their  time  is  absorbed 
in  the  pursuit  of  gain.  The  diversion  of  their  energies 
from  the  needs  of  government  is  the  opportunity  of 
privilege,  and  privilege  undermines  Democracy. 

WHAT  THE   TAXPAYERS   MUST  DEMAND 

The  war  leaves  us  the  legacy  of  a  stupendous  debt. 
It  will  reach,  if  it  does  not  exceed,  $35,000,000,00x3. 
The  annual  interest  upon  this  stupendous  sum  will  be 
$1,400,000,000.  This  means  a  vastly  increased  rate 
and  radius  of  taxation.  The  people  will  bear  the  burden 
willingly,  if  economy  in  public  administration  and  the 
application  of  every  dollar  to  the  public  needs  shall 
become  the  policy  of  the  Government.  They  will 
not  and  should  not  be  content  if  the  gross  extravagances 
of  the  past  continue. 

In  1910,  Senator  Aldrich  declared  that  ordinary  effi- 
ciency in  public  administration  would  annually  save  the 
people  $300,000,000.  It  would  now  save  twice  that 
sum.  If  the  taxpayers  of  America  will  unite  in  demand- 
ing a  radical  revision  of  our  public  service,  a  consolida- 
tion of  duplicating  bureaus,  and  the  institution  of  the 
budget  system  in  appropriations,  it  will  be  done.  If 
they  will  also  rigidly  supervise  public  expenditures, 
taxation  can  be  largely  reduced.  If  they  fail  to  do  this, 
our  appropriations  will  keep  increasing,  for  every  de- 
mand made  upon  the  Treasury  is  complied  with  when 


The  Basis  for  Constructive  Settlements    11 

political  or  organized  force  is  behind  it,  and  everything 
in  these  days  is  organized  except  the  man  who  pays  the 
taxes.  Moreover,  the  huge  debts  of  the  nations,  how- 
ever well  their  revenues  are  managed  and  applied,  will 
always  be  a  fruitful  source  of  disaffection. 

To  those  possessing  none  of  it,  yet  paying  taxes  to 
meet  its  fixed  requirements,  the  impulse  toward  repudia- 
tion may  ripen  into  an  insistent  clamor.  Once  begun, 
it  may  spread  like  the  virus  of  influenza,  from  nation 
to  nation,  and  from  public  to  private  obligations.  Noth- 
ing could  be  more  disastrous  to  a  people  than  the  success 
of  such  a  movement,  which  will  inevitably  arise,  what- 
ever our  policy.  It  is  certain  to  materialize  if  in  our 
financial  administration  we  do  not  at  all  times  apply 
sound  principles  to  taxation  and  exercise  a  wise  and 
frugal  economy  in  expenditures.  Nothing  is  more  diffi- 
cult in  a  Republic  than  this,  if  public  interest  is  lax 
or  non-existent. 

LABOR   SHOULD   UNDERSTAND   ECONOMIC   LAWS 

Readjustments  toward  normal  conditions  must  in- 
evitably react  on  war  prices  and  wages.  The  first  will 
not  be  disturbing,  the  last  may  prove  alarmingly  so. 
Lowering  of  salaries  and  wages,  though  absolutely 
essential  to  a  falling  market,  is  always  opposed  by  the 
wage  earner  and  frequently  to  the  extremes  of  violence. 
The  higher  these  have  risen,  the  more  bitter  the  opposi- 
tion to  their  diminution  becomes.  This  inevitable 
situation  should  be  promptly  recognized  and  every 
effort  made  to  prepare  against  it.  Labor  should  be 
urged  to  acquaint  itself  with  the  economic  laws  which 
compel  the  change,  and  with  its  compensation  in  low- 


12  Reconstructing  America 

ered  cost  of  living.  And  the  change  should  come  as 
gradually  and  as  universally  as  possible. 

Our  immigration  laws  have  been  largely  molded  by 
political  and  economic  considerations.  The  same  is  true 
of  those  relating  to  naturalization.  Much  of  our  immi- 
gration has  represented  the  best  of  Europe.  These 
have  been  of  inestimable  value  to  the  country.  They 
have  cast  their  lot  in  America  for  all  time,  sharing  our 
burdens  and  responsibilities,  and  aiding  in  the  great 
task  of  building  a  new  nation  upon  a  virgin  continent. 

But  the  demand  for  labor  and  the  need  for  ballots 
have  flooded  our  shores  with  a  mass  of  humanity  appar- 
ently unassimilable. 

The  disruption  of  the  Central  Powers,  followed  by  the 
establishment  of  popular  government  for  their  liberated 
peoples,  will  doubtless  remove  all  restrictions  upon  their 
continued  emigration.  The  burden  of  debt,  coupled 
with  unsettled  economic  conditions,  will  encourage  the 
western  movement  of  their  population.  The  added 
stimulus  of  the  great  steamship  companies,  eager  for 
their  old  steerage  traffic,  may  rapidly  reestablish  the 
high  tide  of  ante-war  immigration.  If  it  is  to  be  checked, 
the  dam  must  be  erected  on  this  side  of  the  Atlantic, 
and  no  time  should  be  lost  in  its  construction. 

BOLSHEVISM    STARTED    IN   OUR    SWARMING   CENTERS 

Bolshevism  has  given  the  world  a  hideous  illustration 
of  the  fundamental  truth  that  when  liberty  is  divorced 
from  law,  justice  disappears.  The  freedom  of  unre- 
strained license  is  the  only  freedom  of  the  mob.  Under 
the  sway  of  that  many-headed  despot,  crime  holds 
high  carnival.  It  is  to  this  chaos  that  International 


The  Basis  for  Constructive  Settlements    13 

Socialism  would  lead  the  world.  Russian  anarchy  is 
popularly  ascribed  to  the  oppression  of  the  Romanoff 
dynasty.  That  is  largely  true.  Yet  it  is  a  sinister 
fact  that  excepting  Lenine,  nearly  all  the  leaders  of 
Russian  Bolshevism  graduated  from  the  swarming 
centers  of  New  York,  Chicago,  and  Philadelphia.  Trot- 
sky, Volodarsky,  Kritzky,  Martoff,  are  some  of  them. 
Their  bloody  program  was  formulated  here,  and  here 
they  proposed  to  test  it,  when  opportunity  beckoned, 
and  Russia  became  their  victim.  From  that  Con- 
tinental slaughterhouse  they  salute  their  accessories  in 
America  and  urge  them  to  the  commission  of  similar 
atrocities. 

The  assimilation  of  races,  so  essential  to  a  national 
unity,  cannot  be  effected  under  conditions  now  prevail- 
ing. While  they  continue,  our  citizenship  must  be 
heterogeneous  and  discordant.  A  polyglot  people, 
without  geographical  separation,  with  conflicting  aims 
and  ideals,  united,  yet  socially,  morally,  and  economi- 
cally antagonistic,  cannot  endure  in  a  Republic.  Racial 
classification  is  the  precursor  of  racial  animosities, 
and  racial  animosities  imperil  the  national  safety. 

But  our  trend  toward  class  distinctions  is  not  wholly 
ethnological.  It  proceeds  as  well  along  other  lines,  and 
finds  expression  in  trades,  in  agriculture,  in  legislation. 
Our  Federal  laws  bristle  with  clauses  recognizing  and 
favoring  them.  In  matters  of  penalty,  revenue,  trusts, 
transportation,  and  appropriation,  we  frequently  exclude 
foreigners,  workmen,  government  employees,  fraternal 
organizations,  and  some  others  from  punitive  and  bur- 
densome enactments.  We  also  extend  them  privileges 
not  conferred  upon  others  less  potential  in  numbers 


14  Reconstructing  America 

or  influence.  The  equal  protection  of  the  laws  will, 
if  this  practice  be  not  abandoned  soon,  be  honored  more 
in  the  breach  than  the  observance. 

LAWS   MUST  BE   UNIFORM  IN  THEIR  APPLICATION 

The  laws  are  potent  for  the  protection  and  welfare  of 
the  citizen  only  as  they  are  uniform  in  their  applica- 
tion, just  in  their  mandates,  and  respected  by  the  people. 
Laxity  in  their  enforcement  and  indifference  to  their 
requirements  have  long  been  a  conspicuous  and  sinister 
feature  of  our  national  life.  This  is  particularly  true 
of  the  criminal  law.  The  disparity  between  homicides 
and  convictions  will  serve  to  illustrate  the  assertion. 
Their  proportions  are  as  thirty  to  one,  and  those  due  to 
labor  controversies  seldom  reach  the  stage  of  a  formal 
indictment.  The  expense  of  modern  litigation,  crowded 
dockets,  and  the  law's  delays  may  be  largely  responsible 
for  the  low  level  of  public  respect  for  statutes  and  con- 
stitutions ;  but  whatever  the  cause,  the  evil  is  a  seri- 
ous one.  The  public  safety  depends  upon  the  public 
order ;  the  public  order  rests  upon  the  sanction  and  the 
mandate  of  the  law,  and  the  law  is  made  contemptible 
whenever  its  protection  is  denied  to  the  meanest  citizen. 

To  this  condition  we  must  plead  guilty,  for  it  is  a 
melancholy  fact  that  the  citizen  frequently  is  denied 
the  equal  protection  of  the  laws,  either  by  exposure 
without  redress  to  acts  of  violence  or  through  the  tedious 
and  expensive  processes  of  legal  machinery.  Both 
mean  a  denial  of  justice,  and  Burke  said  that  a  govern- 
ment not  founded  on  justice  labored  under  the  imputa- 
tion of  being  no  government  at  all. 

If  our  organic  act  means  anything,  every  citizen  is 


The  Basis  for  Constructive  Settlements    15 

free  to  work  according  to  his  own  desire.  He  should  be 
subject  only  to  the  limitations  of  the  law.  To  inter- 
fere with  this  right  or  permit  others  to  do  so  with  im- 
punity is  to  undermine  the  foundations  of  our  political 
structure.  A  law  which  does  not  throw  the  shield  of 
its  protection  around  him  is  worse  than  useless.  It  is 
a  wanton  delusion.  On  the  other  hand,  ample  punish- 
ment for  the  commission  of  crimes  is  provided,  and 
safeguards  as  well  for  the  shielding  of  the  innocent. 
All  that  is  needed  is  their  vigorous  enforcement.  If 
they  are  not  applied,  the  fault  is  with  the  community 
much  more  than  with  the  criminal.  Let  no  man  there- 
fore justify  his  contempt  for  the  law  by  pleading  its 
non-enforcement.  For  that  he  is  in  part  responsible. 

ENEMIES   TO   ORDER  AND   CONTENT 

Ours  is  a  land  of  waste,  and  waste  is  the  enemy  of 
thrift.  Some  one  has  said  that  with  our  resources  the 
French  would  have  saved  enough  since  the  century 
began  to  pay  her  own  and  Britain's  war  expenses. 
The  war  has  brought  us  the  wisdom  and  the  simplicity 
of  thrift.  We  should  make  it  a  national  virtue.  Thrift 
is  the  foe  of  disorder,  a  virtue  that  becomes  hostage  to 
fortune.  Hunger  is  stranger  to  it,  and  hunger  never 
breeds  reforms.  Hunger  breeds  riot  and  bloodshed. 

In  America  hunger  is  a  social  crime.  Out  of  our  abun- 
dance we  can  feed  other  continents.  The  fault  lies  in 
distribution.  If  private  control  of  transportation  can- 
not solve  the  vital  problem  of  its  distribution,  public 
control  must.  Democracy  requires  food  and  part  of 
her  mission  is  to  secure  it. 

Corporate  mismanagement  and  consolidation,   huge 


16  Reconstructing  America 

issues  of  fictitious  capital,  corners  in  foodstuffs,  manip- 
ulation of  stock  markets,  fortunes  realized  overnight 
through  financial  jugglery,  preponderant  control  of 
money  and  credits  disfigured  the  commercial  history 
of  the  two  decades  preceding  our  declaration  of  war. 
They  constitute  a  sordid  and  humiliating  chapter  of 
greed  and  financial  profligacy,  and  simply  justify  the 
wave  of  public  disapproval  culminating  in  political 
revolt  and  codes  of  primitive  legislation. 

These  practices  cannot  be  too  seriously  criticized. 
They  have  inspired  as  they  have  justified  every  extreme 
of  agitation.  Such  operations  cannot  be  resumed  if 
we  hope  to  preserve  free  government  in  America. 

Otherwise  than  in  the  fortunate  development  of 
mines,  great  wealth  may  be  suddenly  acquired  only 
through  sinuous  and  criminal  manipulation.  Its  fre- 
quent occurrence  demoralizes  the  people.  It  begets 
discontent  and  compels  imitation.  The  effort  to  get 
rich  quick  becomes  infectious.  Men  look  with  disdain 
upon  the  slow  but  legitimate  processes  of  accumulation, 
and  drift  from  plodding  industry  to  the  stock  ticker 
and  the  exchanges.  And  as  the  vast  majority  of  the 
seekers  for  sudden  wealth  are  predoomed  to  failure,  they 
will  sooner  or  later  join  the  ever  increasing  army  of  the 
discontented  and  reproach  the  social  order  for  their 
misfortunes. 

THE    EVILS     OF     THE    WELL-TO-DO.      CAPITAL    AND    LABOR 

The  well-to-do  element  of  the  country  is  its  most  influ- 
ential class.  It  occupies  the  great  domain  of  leadership 
and  constructive  development.  It  can  ill  afford  to 
weaken  the  social  and  economic  structure.  It  cannot 


The  Basis  for  Constructive  Settlements    17 

commit  or  countenance  methods  which  breed  discontent 
and  unsettle  confidence.  What  it  does  or  abstains 
from  doing,  is  therefore  of  great  concern  to  the  public 
and  of  prime  importance  to  itself.  When  confidence 
in  its  honesty  or  public  spirit  is  impaired  or  overthrown, 
the  hour  of  upheaval  will  come.  I  therefore  affirm 
that  the  suppression  of  the  financial  malversations  so 
prevalent  during  the  past  quarter  century  is  an  insistent 
and  overshadowing  duty. 

The  chasm  between  labor  and  capital  must  be  spanned. 
This  cannot  be  done  by  force,  by  class  resentments, 
nor  by  recrimination.  Each  of  these  great  forces  must 
understand  the  other's  viewpoint.  Both  must  realize 
that  they  are  complements  and  coworkers  of  progress. 
Without  the  one  the  other  is  moribund.  Neither  can 
be  discarded  from  the  economies  of  trade  and  industry. 
Cooperation  between  them  is  indispensable  to  the 
public  and  private  well-being.  They  must  become  part- 
ners in  the  largest  sense,  each  exercising  its  legitimate 
functions  for  a  common  purpose. 

The  perspective  is  somber  but  not  at  all  discouraging. 
Every  generation  has  its  tasks,  and  if  ours  is  unduly 
burdensome,  its  performance  will  place  posterity  under 
a  larger  obligation. 

WHAT  WE   MUST   DO 

We  must  institute  and  enforce  a  rigid  economy  in 
public  administration.  We  must  unify  our  citizenship. 
We  must  have  a  common  language  with  which  all  men 
and  women  must  be  made  familiar.  We  must  bring 
our  institutions  and  traditions  home  to  the  understand- 
ing of  every  one.  We  must  extend  the  hand  of  sympathy 


18  Reconstructing  America 

and  encouragement  to  every  alien  in  the  land,  give  him 
a  share  in  the  country's  affairs,  and  imbue  him  with  the 
spirit  of  America.  We  must  discourage  the  community 
life  of  the  foreigner  by  teaching  him  the  need  for  assimi- 
lation. We  must  require  him  to  become  naturalized 
within  a  fixed  time  after  his  arrival  or  return  whence 
he  came.  We  must  make  him  learn  the  English  tongue 
and  become  reasonably  familiar  with  the  requirements 
of  citizenship  as  a  candidate  of  naturalization.  We 
must  suppress  all  associations  devoted  to  the  commis- 
sion of  crime  and  the  advocacy  of  disorder.  We  must 
radically  change  our  immigration  laws.  We  must 
have  no  ensign  but  the  Stars  and  Stripes.  We  can  have 
no  companionship  with  the  red  flag  of  anarchy  and 
revolution.  We  must  assert  and  enforce  the  equal 
protection  of  the  laws,  do  away  with  the  mob  and 
gibbet  the  lyncher.  We  must  teach  the  great  truth 
that  organized  and  ordered  society  is  essential  to  man's 
existence  and  that  protection  of  life  and  property  is 
the  basis  of  all  government  worthy  of  the  name.  We 
must  demonstrate  that  the  strict  observance  of  law  is 
necessary  alike  to  the  happiness  of  nations  and  the 
security  of  communities.  We  must  make  treason  odious. 
We  must  harmonize  the  discordant  factions  of  industry 
and  commerce.  We  must,  if  need  be,  forget  party 
ties  in  the  stress  of  tremendous  obligation. 

We  may  each  and  all,  faithful  to  our  traditions,  and 
reverencing  our  ideals,  struggle  as  Democrats  and  Repub- 
licans for  the  supremacy  of  our  convictions,  but  we 
must  remember  that  we  are,  above  all,  Americans,  whose 
first  and  final  duty  is  to  perpetuate  the  welfare  and  shape 
the  destiny  of  the  great  Republic.  The  ark  of  Democ- 


The  Basis  for  Constructive  Settlements    19 

racy's  covenant  was  committed  to  Anglo-Saxon  keep- 
ing long  ago.  Our  fathers  have  proven  worthy  of  the 
trust ;  we,  too,  must  keep  the  faith.  Henceforth  the 
United  States  shall  be  a  great  training  ground  for  the 
growth  and  development  of  a  stalwart  and  genuine 
Democracy. 

IV 

INTERNATIONAL  RECONSTRUCTION  THROUGH  THE 
LEAGUE  OF  NATIONS 

Bv  HON.  WILLIAM  H.  TAFT 

The  international  compact  which  is  to  follow  this 
war  is  to  be  more  ambitious  than  any  ever  made  before. 
The  world  is  larger,  the  nations  are  more  numerous, 
the  field  of  war  has  been  greater,  and  the  political 
changes  are  to  be  far  more  extensive  than  the  world 
has  ever  known.  The  only  peace  comparable  with 
this  is  that  which  was  made  after  Napoleon's  fall  by 
the  monarchs  who  constituted  the  Holy  Alliance.  That 
was  a  League  of  Nations,  with  a  high-sounding  declara- 
tion of  disinterestedness  and  love  of  peace.  It  was  a 
failure  because  the  real  purposes  which  governed  its 
formation  and  life  were  wrong  and  unstable.  It  rested 
on  the  Divine  right  of  Kings,  and  its  objects  were  to 
recognize  dynastic  claims  and  to  establish  and  main- 
tain them.  It  took  into  consideration  neither  the  inter- 
est nor  the  will  of  the  peoples  under  the  governments 
which  it  was  setting  up  and  proposed  to  maintain. 
After  it  had  lived  a  few  years,  it  became  a  byword  of 
reproach.  Its  example  has  been  used  to  show  the 
impractical  and  short  life  of  the  League  of  Nations 
which  we  propose. 


20  Reconstructing  America 

The  difference  between  the  Holy  Alliance  and  our 
League  is  in  the  purpose  and  principle  of  its  formation. 
Our  League  looks  to  a  union  of  the  democratic  nations 
of  the  world,  to  the  will  of  the  peoples,  expressed  through 
their  governments,  as  its  basis  and  sanction.  It  looks 
to  the  establishment  of  new  governments  by  popular 
choice  and  control.  It  is  to  be  founded  on  justice,  im- 
partially administered,  and  not  on  the  interests  of 
Kings  or  Emperors  or  dynasties.  It  is  to  rise  as  a 
structure  built  upon  the  ashes  of  militarism,  and  it  is 
to  rest  on  the  pillars  of  justice  and  equality  and  the 
welfare  of  peoples. 

REARRANGING  THE  MAP  OF  EUROPE 

I  have  referred  to  the  Holy  Alliance  not  only  to  answer 
an  argument,  but  also  as  a  precedent  to  prove  that  a 
treaty  of  peace,  rearranging  the  map  of  Europe,  cannot 
be  made  without  a  League  of  Nations.  Think  of  what 
this  present  peace  has  to  compass.  We  can  realize  it 
by  considering  the  points  of  President  Wilson's  message 
of  January  8,  which  make  an  outline  of  the  terms  of 
peace  which  are  to  be  fixed. 

In  the  first  place,  we  are  to  have  some  disposition  of 
the  German  colonies,  in  accord  with  the  interests  of  the 
people  who  live  in  them.  Germany  has  made  such 
cruel  despotisms  of  her  colonies  that  it  is  quite  likely 
the  Allies  will  insist  that  they  shall  be  put  under  some 
other  Power  more  to  be  trusted  in  securing  the  welfare 
of  backward  peoples. 

Thus  we  are  to  set  up  a  new  government  in  East  and 
West  Africa,  in  Australasia,  in  China,  and  in  some  of  the 
islands  of  the  Pacific.  Then  we  are  to  deal  with  Russia. 


The  Basis  for  Constructive  Settlements    21 

If  we  separate  from  her  the  Ukraine  and  the  Baltic 
Provinces  and  Finland,  there  are  three  or  four  new 
nations  to  establish.  Great  Russia  is  now  under  the 
domination  of  bloody  anarchists,  and  we  must  free 
her  and  give  to  her  good  people  the  opportunity  to 
organize  and  establish  a  free  and  useful  government. 
This  is  a  problem  of  the  utmost  complexity.  In  Austria 
we  are  to  create  a  nation  of  the  Czecho-Slavs,  embrac- 
ing Bohemia,  Moravia,  and  Slovakia.  We  are  to  cut 
this  nation  out  of  the  Dual  Empire,  and  take  it  from 
Austria  and  from  Hungary.  We  are  to  do  the  same 
thing  with  the  Jugo-Slavs  on  the  south  of  Austria 
and  Hungary  and  establish  new  boundaries  there. 

We  are  to  settle  the  boundaries  of  the  Balkans.  We 
are  likely  to  give  Rumania  to  the  Rumanians  of  Hun- 
gary and  of  Bessarabia.  We  are  to  establish  a  new  state 
of  Poland  out  of  the  Russian,  Austrian,  and  German 
Poland,  and  we  are  to  give  this  state  access  to  the  sea. 
The  fixing  of  those  boundaries  and  the  determination  of 
the  method  of  reaching  the  sea  present  issues  of  the 
utmost  delicacy  and  difficulty.  We  are  to  determine 
the  status  of  Constantinople  and  the  small  tract  now 
known  as  Turkey  in  Europe.  We  are  to  fix  the  limits 
of  Turkey  in  Asia,  to  set  up  a  new  government  in  Pales- 
tine, to  recognize  a  new  government  of  Arabia,  to  father, 
it  may  be,  the  creation  of  a  new  state  in  the  Caucasus, 
and  to  establish  the  freedom  of  Armenia. 

WHAT  WILL   BE   NECESSARY   TO   ACCOMPLISH   PERMANENT 

PEACE 

The  mere  recital  of  them  is  most  convincing  of  the 
intricacy  of  these  problems.  The  Congress  of  Nations 


Reconstructing:  America 


will  probably  find  it  impossible  definitely  to  settle  them 
all.  It  will  have  to  create  commissions,  with  judicial 
and  conciliatory  powers,  able  to  devote  time  enough 
to  make  proper  investigation  and  thus  to  reach  just, 
defensible,  and  practical  conclusions.  .  .  . 

We  know  that  we  have  got  to  rearrange  the  map  of 
Europe,  and,  in  so  far  as  it  is  practicable  in  that  arrange- 
ment, to  follow  popular  choice  of  the  peoples  to  be 
governed.  But  such  a  flowing  phrase  will  not  settle  the 
difficulty.  It  is  merely  a  general  principle  that  in  its 
actual  application  often  does  not  offer  a  completely 
satisfactory  solution  ;  and  after  the  Congress  shall 
have  made  the  decisions,  sore  places  will  be  left,  local 
enmities  will  arise,  and  if  that  permanent  peace  which 
justifies  the  war  is  to  be  obtained,  the  world  compact 
must  itself  contain  the  machinery  for  settlement  of 
such  inevitable  disputes. 

In  other  words,  we  don't  have  to  argue  in  favor  of  a 
League  to  Enforce  Peace  —  the  nations  which  enter  this 
Congress  cannot  do  otherwise  than  establish  it.  It  faces 
them  as  the  only  possible  way  to  achieve  their  object. 

JUDGMENTS  MUST  BE  CARRIED  OUT  BY  FORCE, 
IF  NECESSARY 

Germany  and  Austria  and  Bulgaria  and  Turkey  are 
to  indemnify  the  countries  which  they  have  outraged 
and  devastated.  Commissions  must  be  created,  judicial 
in  their  nature,  to  pass  upon  what  the  amount  of  the 
indemnity  shall  be,  and  then  an  international  force 
must  exist  to  levy  execution  if  necessary  for  the  judg- 
ment upon  the  countries  whose  criminal  torts  are  to  be 
indemnified.  We  must,  therefore,  not  only  have,  as  a 


The  Basis  for  Constructive  Settlements    23 

result  of  the  Congress,  the  machinery  of  justice  and 
conciliation,  but  we  must  retain  a  combined  military 
force  of  the  Allies  and  victors  to  see  to  it  that  these 
just  judgments  are  carried  out. 

Moreover,  the  Congress  cannot  meet  without  enlarg- 
ing the  scope  of  international  law  and  making  more 
definite  its  provisions.  The  very  functions  which  the 
Congress  is  to  exercise  in  fixing  the  terms  of  peace  will 
necessitate  a  statement  of  the  principles  upon  which 
it  has  been  guided.  That  will  lead  to  a  broadening 
of  the  scope  of  existing  principles  of  international  law 
and  a  greater  variety  in  their  applications.  There- 
fore, whether  those  who  are  in  the  Congress  wish  it 
or  not,  they  cannot  solve  the  problems  which  are  set 
before  them  without  adopting  the  principles  of  our 
League  to  Enforce  Peace  in  its  four  planks  in  our  plat- 
form —  a  court,  a  Commission  of  Conciliation,  enforce- 
ment of  submission,  and  a  Legislative  International 
Congress  to  make  International  Law. 

They  will  have  to  create  such  machinery  for  the  ad- 
ministration and  enforcement  of  the  treaty  as  to  the 
Central  Powers,  the  new  nations  created,  and  Russia. 
Having  gone  so  far,  as  they  must,  can  they  fail  to  extend 
their  work  only  a  little  to  include  the  settlement  of  all 
future  differences  between  all  the  nations  that  are 
parties  to  the  League?  A  League  for  such  future 
purposes  will  be  no  more  difficult  to  make  and  main- 
tain than  the  League  into  which  they  are  driven  by 
the  necessities  of  the  situation.  The  stars  in  their 
course  have  been  fighting  for  the  achievement  of  our 
purpose  and  the  foundation  of  this  League,  and  the 
doubters  may  not  escape  it. 


24  Reconstructing  America 

ARGUMENTS  THAT  ARE  SET  UP  AGAINST  A  LEAGUE 

In  the  first  place,  a  good  many  have  created  a  straw 
League  and  have  knocked  it  down  without  difficulty. 
They  have  attributed  to  us  the  views  and  principles 
held  by  extremists,  who  perhaps  support  our  League, 
but  whose  extreme  views  we  don't  adopt  or  need  to 
adopt.  Thus  it  is  said  that  we  favor  internationalism, 
that  we  are  opposed  to  nationalism,  that  we  wish  to 
dilute  the  patriotic  spirit  into  a  vague  universal  brother- 
hood. That  there  are  socialists  and  others  who  enter- 
tain this  view,  and  who  perhaps  support  the  League 
to  Enforce  Peace,  may  be  true;  but  the  assumption 
that  such  views  are  necessary  to  a  consistent  support 
of  the  League  is  entirely  without  warrant. 

I  believe  in  nationalism  and  patriotism,  as  distin- 
guished from  universal  brotherhood,  as  firmly  as  any 
one  can.  I  believe  that  the  national  spirit  and  the 
patriotic  love  of  country  are  as  essential  in  the  progress 
of  the  world  as  the  family  and  the  love  of  family  are 
essential  in  domestic  communities.  But  as  the  family 
and  the  love  of  family  are  not  inconsistent  with  the 
love  of  country,  but  only  strengthen  it,  so  a  proper, 
pure,  and  patriotic  nationalism  stimulates  a  sense  of 
international  justice  and  does  not  detract  in  any  way 
from  the  spirit  of  universal  brotherhood. 

Again  it  is  said  that  in  the  League  we  injure  nationalism 
by  abridging  the  sovereignty  of  our  country  in  that  we 
are  to  yield  to  an  international  council  or  an  interna- 
tional tribunal,  in  which  we  only  have  one  representa- 
tive, the  decision  of  questions  of  justice  and  of  national 
policy.  Sovereignty  is  a  matter  of  definition.  The 


The  Basis  for  Constructive  Settlements    25 

League  does  not  contemplate  the  slightest  interference 
with  the  internal  government  of  any  country.  The 
League  does  not  propose  to  interfere,  except  where  the 
claims  of  right  of  one  country  clash  with  the  claims  of 
right  of  another.  To  submit  such  claims  of  right  to 
an  impartial  tribunal  no  more  interferes  with  the  sover- 
eignty of  a  nation  than  the  submission  of  an  individual 
to  a  hearing  and  decree  of  court  interferes  with  his 
liberty.  The  League  is  merely  introducing  into  the 
world's  sphere  liberty  of  action  regulated  by  law,  in- 
stead of  license  uncontrolled  except  by  the  greed  and 
passion  of  the  individual  nation. 

THE  RIGHT  TO  DECLARE  WAR  AND  ARMAMENT  QUESTIONS 

It  is  said  that  we  are  giving  up  our  right  to  make 
war  or  to  withhold  from  making  it.  We  cannot  take 
away  from  our  Congress  the  right  to  declare  war,  and 
no  one  would  wish  to  do  so.  But  that  is  no  reason  why 
we  should  not  enter  into  an  agreement  to  defend  the 
impartial  judgments  of  the  League  and  to  repress  pal- 
pable violations  of  its  covenants  by  those  who  have 
entered  it.  The  question  must  always  be  for  the  deci- 
sion of  Congress  whether  our  obligations  under  the 
League  require  us  in  honor  to  make  war. 

Then  the  question  is  as  to  disarmament.  The  fourth 
of  the  President's  fourteen  points  contains  the  provision 
that  adequate  guaranties  must  be  given  and  taken  that 
national  armaments  will  be  reduced  to  the  lowest  point 
consistent  with  domestic  safety. 

That  represents  an  aim  and  aspiration,  but  it  cannot 
have  immediate  and  practical  operation.  We  are  the 
victors  in  this  war  which  grew  out  of  the  extensive  arma- 


26  Reconstructing  America 

ment  and  military  power  of  Germany.  It  will  be  a 
legitimate  condition  of  peace  exacted  by  the  victors 
that  Germany  shall  substantially  disarm  and  leave 
the  Allied  Powers  in  a  position  with  armament  sufficient 
to  keep  Germany  within  law  and  right.  How  far  dis- 
armament can  be  carried  must  be  determined  by  experi- 
ence. Disarmament  will  be  accomplished  effectively 
in  great  measure  by  the  economic  pressure  that  will 
be  felt  intensely  by  all  nations  after  this  war,  secondly 
by  such  mutual  covenants  and  general  supervision  of 
an  international  council  as  experience  may  dictate, 
and  third  and  ultimately  by  a  sense  of  security  in  the 
successful  operation  of  this  League  to  Enforce  Peace. 
For  the  time  being  the  people  who  are  afraid  that  the 
United  States  will  make  itself  helpless  to  defend  its 
rights  against  unjust  aggression  are  unduly  exercised. 

Any  practical  League  of  Nations  will  require  the 
United  States  to  maintain  a  potential  military  force 
sufficient  to  comply  promptly  with  its  obligations  to 
contribute  to  an  international  army  whenever  called 
upon  for  League  purposes.  Such  obligation  may  well 
be  made  the  basis  and  the  reason  for  universal  train- 
ing of  youth,  in  accord  with  the  Australian  or  the  Swiss 
system  —  a  system  that  trains  youth  for  a  year  physi- 
cally and  mentally  and  gives  them  a  proper  sense  of 
duty  and  obligation  to  the  state. 

SHALL  GERMANY  BE  ACCEPTED  IN  THE  LEAGUE? 

There  may  be  a  difference  of  opinion  as  to  whether  we 
should  have  such  a  system,  but  there  is  nothing  in  the 
League  to  Enforce  Peace  and  its  principles  which  pre- 
vents its  adoption,  and  either  that  or  some  other  means 


The  Basis  for  Constructive  Settlements    27 

of  maintaining  an  adequate  force  to  discharge  our  obliga- 
tions under  a  League  must  be  found.  While  we  should 
lay  broad  the  foundations  for  a  League  looking  as  far 
into  the  future  as  we  may,  we  must  trust  to  the  future 
to  work  out  the  application  of  those  principles,  to 
amend  the  details  of  our  machinery  and  to  adapt  it 
to  the  lessons  of  experience.  We  know  that  the  real 
hope  of  reducing  armament  and  keeping  it  down  is  the 
maintenance  of  a  League  which  shall  insure  justice 
and  apply  in  its  aid  the  major  force  of  the  world.  As 
the  operation  of  that  League  is  more  and  more  acquiesced 
in,  the  possibility  of  the  safe  reduction  of  armaments 
in  all  countries  will  become  apparent  to  all  and  will  be 
realized. 

Another  question  that  has  agitated  a  good  many 
people  is  whether  we  should  let  Germany  into  the  League. 
That  depends  upon  whether  Germany  makes  herself 
fit  for  the  League.  If  she  gets  rid  of  the  Hohenzollerns, 
if  she  establishes  a  real  popular  government,  if  she  shows 
by  her  national  policies  that  she  has  acted  on  the  lessons 
which  the  war  should  teach  her,  indeed  if  she  brings 
forth  works  meet  for  repentance,  then  of  course  we 
ought  to  admit  her  and  encourage  her  by  putting  her 
on  an  equality  with  other  nations  and  by  using  her  influ- 
ence and  her  power  to  make  the  League  more  effective. 
The  long  drawn  out  payment  of  indemnities  will  keep 
her  in  a  chastened  condition  and  will  keep  alive  in  her 
mind  the  evils  of  militarism. 

I  don't  now  discuss  the  difference  in  the  obligations 
of  the  members  of  such  a  League  as  between  the  great 
Powers  and  the  lesser  Powers.  All  should  have  a  voice 
in  the  general  policy  of  the  League,  but  it  is  well  worthy 


28  Reconstructing  America 

of  consideration  whether  with  the  burden  of  enforcing 
the  obligations  of  the  League  by  military  force  which 
the  greater  Powers  must  carry  they  should  not  have 
larger  voice  in  executive  control.  As  they  are  the  only 
ones  likely  to  be  able  to  create  the  major  force  of  the 
world,  they  may  reasonably  claim  a  right  to  more 
administrative  power. 

THE   RIGHTS    OF   THE   SMALLER   NATIONS 

The  rights  of  the  smaller  nations  will  be  protected 
in  the  Congress  in  which  they  have  a  full  voice,  and  by 
the  impartial  judgments  of  the  judicial  tribunals  and 
the  recommendations  of  the  Commission  of  Concilia- 
tion. There  is  not  the  slightest  likelihood  that  the 
mere  executive  control  by  the  larger  Powers  would 
lead  to  oppression  of  the  smaller  Powers,  because  should 
selfishness  disclose  itself  in  one  of  the  great  Powers, 
we  could  be  confident  of  the  wish  of  the  other  great 
Powers  to  repress  it. 

One  of  the  difficulties  in  the  maintenance  of  a  League 
of  all  nations  will  be  the  instability  of  the  governments 
of  its  members  if  the  League  embraces  all  nations.  On 
the  whole,  the  greater  Powers  are  the  more  stable  and 
the  more  responsible.  It  is  well  therefore  that  upon 
them  shall  fall  the  chief  executive  responsibility.  While 
the  principles  of  the  League  would  prevent  interference 
with  the  internal  governments  as  a  general  rule,  the  utter 
instability  of  a  government  might  authorize  an  attempt 
to  stabilize  it. 

The  possibilities  of  many-sided  world  benefit  from  a 
League  after  it  is  well  established  and  is  working 
smoothly,  it  is  hard  to  overestimate.  For  the  present, 


The  Basis  for  Constructive  Settlements    29 

as  the  result  of  this  Congress  of  Nations  to  meet  and 
settle  the  terms  of  peace,  we  may  well  be  content  to  have 
a  League  established  on  broad  lines,  with  principles 
firmly  and  clearly  stated,  and  with  constructive  provi- 
sions for  amendment  as  experience  shall  indicate  their 
necessity.  I  verily  believe  we  are  in  sight  of  the  Prom- 
ised Land.  I  hope  we  may  not  be  denied  its  enjoy- 
ment. 


CHAPTER  II 

GOVERNMENT  AND  BIG  BUSINESS 
I 

DANGERS   IN  AUTOCRATIC   AUTHORITY   AND   GOVERN- 
MENT OWNERSHIP 

BY  SENATOR  JAMES  E.  WATSON  . 

GREAT  questions  have  the  habit  of  reappearing  in 
human  history.  They  reappear  among  all  peoples  and 
in  all  races;  and  since  the  establishment  of  this  Re- 
public we  have  been  confronted  at  many  periods  with  a 
tendency  on  the  one  hand  to  confer  greater  power  upon 
the  President,  and  on  the  other  to  confer  greater  author- 
ity upon  the  majority. 

In  my  judgment  we  are  confronted  with  a  condition 
that  in  the  first  place  will  add  to  the  autocratic  authority 
of  one  man,  and  on  the  other  hand  will  give  increasing 
power  to  the  majority.  These  institutions  of  ours  are 
based  upon  four  fundamentals.  They  are,  first,  in- 
dividual rights,  and  to  preserve  these  individual  rights 
a  government  threefold  in  character  —  legislative,  ex- 
ecutive, and  judicial.  The  four  pillars  of  enduring  rep- 
resentative government,  founded  upon  a  constitution 
and  preserved  by  its  provisions,  are,  therefore,  indi- 
vidual rights,  the  power  of  the  legislature,  the  power 
of  the  executive,  and  the  power  of  the  courts.  If  either 
one  of  these  pillars  be  pulled  down,  by  any  blind  Sam- 


Government  and  Big  Business         31 

son,  the  whole  edifice  will  crumble  and  fall  to  ruin. 
Therefore,  when  we  consider  the  result  of  giving  increased 
power  either  to  the  President  or  to  the  people  of  the 
United  States,  we  threaten  the  invasion  of  the  sphere  of 
representative  government  from  both  sides. 

What  do  I  mean  by  that  proposition?  We  all  know 
that  for  many  years  in  this  country  the  inevitable,  aye, 
the  well-nigh  irresistible,  tendency  has  been  to  augment 
the  authority  of  the  President.  This  has  resulted,  first, 
because  of  the  general  demand  of  the  people,  who  al- 
most universally  believe  in  the  President  and  insist  on 
his  sole  leadership;  and,  second,  because  of  his  being 
the  titular  head  of  the  party  in  power,  and  the  general 
desire  of  members  of  Congress  to  follow  his  leadership 
for  political  reasons.  This  policy  has  been  pursued  both 
in  peace  and  in  war  until  now  the  President  wields  a 
power  unprecedented  in  history. 

This  power  was  inaugurated  when  the  railroads  were 
taken  over ;  and,  unless  Congress  rose  to  check  the  on- 
rushing  tide,  all  the  factories  in  the  country  engaged  in 
the  manufacture  of  munitions  or  war  supplies  would 
be  laid  hold  of,  and  all  the  industries  of  the  nation,  save 
alone  agriculture,  would  soon  be  under  complete  gov- 
ernmental control,  and  that  would  be  so  regulated  as 
to  be  dominated  by  the  bureaucracy  at  the  National 
Capital. 

Therefore,  unlesslwe  were  willing  to  march  to  the  end 
along  the  highway  upon  which  we  have  set  out  it  would 
mean  a  fight  to  the  death  with  national  and  interna- 
tional socialism  when  the  tides  of  war  shall  have  rolled 
away.  Four  millions  of  people  on  the  payroll,  four 
millions  of  Government  employees  at  the  close  of  the  war; 


32  Reconstructing  America 

four  millions  of  persons  under  direct  obligation  to  the 
administration  —  would  constitute  a  tremendous  organ- 
ization to  transform  governmental  control  in  time  of 
war  to  governmental  ownership  in  time  of  peace;  and, 
if  we  are  to  credit  Secretaries  Baker,  Daniels,  and  Burle- 
son,  this  is  the  avowed  object  of  it  all. 

THE  DANGERS   IN   GOVERNMENT   OWNERSHIP 

If  it  be  stated  that  this  prediction  is  only  an  idle 
dream,  I  answer  that  this  use  of  these  forces  has  already 
begun  in  this  country  and  will  become  more  and  more 
dangerous  as  the  number  of  industries  under  Govern- 
ment control  is  increased.  "There  is  not  room  enough 
in  this  great  world  for  the  German  flag  and  the  Amer- 
ican flag,"  remarked  Secretary  McAdoo  at  El  Paso, 
Tex.,  to  a  meeting  of  railroad  employees,  on  the  lyth  of 
April,  "and  we  are  going  to  make  the  American  flag 
fly  over  Berlin  before  we  get  through."  And  then  he 
continued :  "The  railroads  must  function  150  per  cent, 
for  we  are  not  employees  of  the  railroad  companies  but 
of  Uncle  Sam,  enlisted  in  the  great  legion  of  liberty." 
He  asked  the  men  not  to  become  impatient  because  of 
the  delay  of  fixing  of  the  new  wage  schedule,  adding 
that  if  a  raise  was  granted  to  the  railroad  men  it  would 
be  retroactive  and  they  would  then  be  able  to  buy 
Liberty  bonds. 

Then  came  this  significant  statement,  which  points  the 
moral  to  my  argument,  in  which  he  says : 

"You  are  all  my  boys,  and  I  don't  intend  to  let  any- 
one kick  you  around,  for  I  will  defend  you  to  the  limit 
when  you  are  right,  and  you  won't  go  wrong  I  am  sure." 

That  was  as  straight  a  bid  for  control  as  was  ever  made 


Government  and  Big  Business         33 

anywhere  in  this  land.  Suppose  there  were  4,000,000  of 
them,  cannot  any  one  see  the  power,  cannot  anyone  appre- 
hend the  danger  ?  And  what  was  the  inevitable  result  ? 
Scarcely  had  his  words  ceased  to  echo  throughout  the 
country  until  there  was  a  perceptible  letting  down  in 
efficiency  among  railroad  men. 

Everybody  knows  that  this  is  the  situation  with  the 
railroads,  and  everybody  must  know,  too,  that  the  gov- 
ernmental control  of  the  lines  will  mean  a  greater  degree 
of  inefficiency  in  their  operation,  just  as  it  does  wherever 
the  Government  controls.  And  this  movement  for 
government  ownership,  like  a  ball  of  snow,  gathers  force 
as  it  is  pushed  along. 

No  sooner  had  the  railroads  been  taken  over  than 
wages  were  increased  $300,000,000. 

CONGRESSIONAL   AND   PRESIDENTIAL   POWERS   DEFINED 

If  it  be  said  that  Congress  has  the  right  to  raise  and 
equip  armies,  I  concur.  That  is  not  a  presidential 
function ;  that  is  wholly  a  legislative  function.  Congress 
has  the  right  to  establish  and  maintain  navies.  This  is 
entirely  within  the  purview  of  Congressional  authority. 
But  after  we  have  raised  armies,  after  we  have  established 
navies,  the  only  point  of  contact  that  the  legislative 
branch  has  with  the  Army  and  the  Navy  is  to  raise 
revenue  to  support  them.  After  being  raised  and  estab- 
lished, the  Army  and  the  Navy  pass  over  into  the  execu- 
tive sphere  of  action  free  from  any  influence  of  legis- 
lative authority. 

But  while  that  is  true  as  to  the  military  establishment, 
it  is  not  essentially  true  as  to  the  industry  of  the  country. 
Congress  alone  has  power  to  regulate  commerce.  The 


34  Reconstructing  America 

President,  for  instance,  cannot  take  charge  of  the  mines 
without  the  authority  of  Congress.  It  is  the  legislative 
function  to  regulate  them  as  well  as  agriculture  and 
manufacturing  and  transportation  and  navigation. 
That  is  the  province  of  the  legislative  body.  The  Presi- 
dent has  no  more  right  to  invade  that  sphere  without  our 
invitation  than  we  have  to  invade  his  sphere  and  deter- 
mine upon  the  location  of  troops  or  the  disposition  of 
navies. 

CONGRESS  HAS  RELEASED   ITS   POWER 

Financial  and  economic  problems  are  not  to  be  con- 
trolled by  one  man  in  our  system  of  government,  except 
in  the  case  of  most  exigent  necessity.  Congress  alone  has 
the  right  to  assume  the  initiative  in  dealing  with  these 
problems. 

Therefore,  when  the  President  sends  down  word  in 
some  indirect  and  roundabout  way  that  he  would  like 
to  have  control  of  all  the  telegraph  and  all  telephone 
lines  of  the  country,  it  is  up  to  me  to  decide  for  myself 
as  to  whether  or  not  that  is  a  wise  proposition.  I  am 
under  no  obligation  to  obey  that  voice  unless  it  appeals 
to  my  conscience  and  addresses  itself  to  my  judgment, 
because  Congress  controls  the  Civil  Establishment  of 
the  United  States. 

It  is  very  truth,  the  present  Congress  has  conferred 
upon  him  greater  authority  than  is  exercised  by  any 
other  living  man,  and,  in  fact,  has  transferred  to  him 
practically  all  the  power  it  has,  save  alone  the  right  to 
raise  revenue. 

Under  these  conditions,  with  the  administration 
demanding  and  receiving  such  grants  of  power,  is  it 


Government  and  Big  Business          35 

conceivable  that,  if  mistakes  are  made  or  if  errors  are 
committed,  that  we,  the  representatives  of  the  people, 
are  to  sit  still  with  sealed  lips  and  bridled  tongues  and 
offer  no  suggestion  as  to  improvements  or  betterments? 

And  in  dealing  with  problems  of  such  vast  moment 
and  consequence,  is  it  thinkable  that  any  one  is  to  be 
branded  as  a  traitor  or  as  a  copperhead  because  he  does 
not  immediately  accept  any  intimation,  however  diluted, 
that  may  emanate  from  the  White  House? 

I  resent  such  imputation.  It  is  unworthy  of  any  one 
who  holds  a  seat  in  this  exalted  place. 

But  we  hear  on  every  hand  the  resounding  cry,  "  Stand 
by  the  President!"  and  we  shall  hear  more  of  it  in  the 
coming  days.  But  let  it  be  understood  once  for  all  that 
if  this  means  to  stand  by  him  as  the  constitutional  head 
of  the  Government,  it  will  find  a  ready  response  through- 
out the  land.  If  it  means  to  stand  by  him  as  Commander 
in  Chief  of  the  military  forces  of  the  nation,  it  will  be 
indorsed  by  every  patriot  beneath  the  flag.  But  if  it 
means  to  stand  by  him  as  a  politician  and  a  partisan, 
it  will  be  resented  by  a  multitude  throughout  the  Union 
who  do  not  believe  in  taking  advantage  of  so  terrible  a 
situation  as  the  present  one  to  reap  a  partisan  harvest. 
If  it  means  to  stand  by  him  as  the  head  of  a  party 
organization,  I  shall  oppose  it  while  I  have  voice  to  sound 
forth  my  protest. 

Men  come  and  men  go,  but  institutions  remain. 
Nations  come ;  they  play  their  part  upon  the  stage  and 
pass  into  history,  but  fundamentals  abide.  I  look  away 
beyond  Woodrow  Wilson  as  an  individual,  to  the  Con- 
stitution, the  country,  and  the  flag,  and  when  they  tell 
me  to  "Stand  by  the  President"  I  construe  that  to  mean 


36  Reconstructing  America 

to  stand  by  the  Constitution,  stand  by  the  country,  and 
stand  by  the  flag,  and  stand  by  Woodrow  Wilson  as 
President  of  the  United  States,  clothed  with  executive 
power,  representing  them  all.  That  is  my  doctrine,  and 
by  that  I  am  willing  to  either  stand  or  fall. 

We  now  have  the  Government  control  of  railroads,  and 
if  to  that  we  are  to  add  a  like  control  of  telegraphs  and 
telephones,  of  express  companies,  and  of  mines,  we  shall 
have  on  the  payroll  4,000,000  of  people,  subject  to  all 
the  temptations  of  American  political  life. 

Germany  is  the  most  highly  socialized  nation  in  the 
world.  The  German  Government  owned  all  the  rail- 
roads ;  it  owned  all  the  telegraph  and  telephone  lines ; 
it  owned  the  express  companies ;  it  owned  or  controlled 
all  the  lines  of  steamboats.  Their  education  was  all 
conducted  at  public  expense ;  their  great  free  laboratories 
were  unexcelled  in  the  world ;  bounties  were  paid  on 
every  hand,  to  her  inventors,  her  scientists,  and  her 
philosophers.  Germany's  laws  touching  workmen's  com- 
pensation, employers'  liability,  old-age  pensions,  and  all 
such  similar  paternalistic  legislation,  made  for  the 
highest  degree  of  socialization  ever  before  known  on 
this  earth. 

But  how  was  it  all  wielded?  By  the  one  man  at  the 
head  of  it  all,  the  one  tyrant  who  governed  it  all  and 
controlled  it  all,  and  who  wielded  that  immense  organi- 
zation because  this  socialized  state  enabled  him  to  do  it. 

WE  ARE  APPROACHING  THE  GERMAN  SYSTEM  OF  CONTROL 

We  are  coming  nearer  and  nearer  every  day  to  that 
system  in  this  nation,  for  if  we  pursue  to  the  limit  the 
policies  proposed  it  will  be  a  question  of  a  very  few  years 


Government  and  Big  Business         37 

until  a  President  will  be  able  to  force  his  reelection  for 
life :  first,  the  autocratic  authority  of  one  man ;  second, 
the  enlarged  power  of  the  people,  the  two  acting  together 
and  reacting  upon  each  other  and  constantly  weakening 
the  legislative  branch  of  the  Government. 

What  reason  is  there  why  this  branch  of  our  Govern- 
ment should  be  weakened  or  its  usefulness  in  any  wise 
impaired  ?  Why  should  its  foundations  be  undermined  ? 
No  other  nation  boasts  of  such  progress  as  ours  since  this 
system  was  adopted.  Under  these  institutions  where 
liberty  is  regulated  by  law  and  where  the  Constitution 
guarantees  the  largest  measure  of  individual  rights  with 
the  largest  measure  of  community  rights,  we  have  gone 
from  success  to  triumph,  and  from  triumph  to  glory,  and 
are  enabled  to-day  to  shoulder  the  mighty  burdens  of  the 
world.  Unless,  therefore,  there  be  some  very  urgent 
reason,  some  imperative  demand,  for  a  change  in  our 
form  of  government,  no  excuse  can  be  offered  for  the 
adoption  of  the  policy  of  government  ownership  pro- 
posed by  all  the  socialists  of  the  day. 

I  believe  that  it  opens  up  a  highway  which,  if  we  tread 
it,  will  lead  finally  to  the  overthrow  of  this  Republic. 
Our  boys,  when  they  come  back,  should  come  back  to  a 
republic,  come  back  to  a  nation  which  believes  in  liberty 
and  in  equality  and  in  fraternity. 

II 

ECONOMIC  ASPECTS  OF  PEACE  READJUSTMENTS 

BY  HON.  CHARLES   EVANS   HUGHES 

We  emerge  from  the  war  with  a  new  national  con- 
sciousness ;  with  a  consciousness  of  power  stimulated  by 


SB  Reconstructing  America 

extraordinary  effort ;  with  a  consciousness  of  the  possi- 
bility and  potency  of  cooperation  and  endeavor  to  an 
extent  previously  undreamed  of. 

Gains  like  these  should  be  abiding,  for  they  mark  not 
only  increase  of  knowledge  and  the  sharpening  of  the 
tools  of  the  mind,  but  an  improvement  in  attitude  and 
appreciation.  The  new  vision  is  never  lost.  We  are 
unworthy  of  our  victory,  if  we  look  forward  with  timidity. 
This  is  the  hour  and  power  of  light,  not  of  darkness. 
We  have  not  defeated  an  insensate  ambition,  to  become 
the  victims  of  our  own  inability  to  govern  ourselves. 
We  have  made  the  world  safe  for  democracy,  but  democ- 
racy is  not  a  phrase,  or  a  form,  but  a  life,  and  what  shall 
that  life  be? 

Some  anxiously  ask,  "What  has  become  of  our  form  of 
government?"  In  saving  the  world,  have  we  lost  our 
Republic?  The  astounding  spectacle  of  centralized 
control  which  we  have  witnessed  has  confused  many 
and  turned  the  heads  of  some.  But  this,  for  the  most 
part,  has  been  the  manifestation  of  the  Republic  in 
arms,  fighting  as  a  unit,  with  powers  essential  to  self- 
preservation,  which  the  Constitution  not  only  did  not 
deny  but  itself  conferred.  So  far  as  we  have  harnessed 
our  strength  for  war,  we  were  acting  under  the  Con- 
stitution and  not  in  violation  of  it.  But  wherever,  in  the 
desire  to  take  advantage  of  the  situation  for  the  purpose 
of  fastening  some  new  policy  upon  the  country,  there 
has  been  resort  to  arbitrary  power  through  acts  un- 
justified by  real  or  substantial  relation  to  a  state  of 
actual  war,  such  acts  will  receive  the  condemnation 
they  deserve  when  they  are  brought  to  the  determina- 
tion of  the  proper  tribunals. 


Copyright  by   Underwood   i\:    L  nuci  wood,    N.    V. 

HON.    fllAKLKS    KVAXS    HUGHES 


Government  and  Big  Business          39 

WAR  POWERS  MUST  NOT  BE  USED  TO  CONTROL  PEACE 
CONDITIONS 

With  the  ending  of  the  war  we  find  ourselves  with  the 
familiar  constitutional  privileges  and  restrictions,  and  it 
behooves  officers  of  Government  to  realize  that  to  make  a 
pretense  of  military  exigency  for  ulterior  purposes,  when 
military  necessity  has  ceased,  is  simply  an  abuse  of 
power  which  will  not  be  permitted  to  escape  censure. 
//  is  undoubtedly  true  that  whenever,  during  the  war,  ex- 
traordinary powers  were  fittingly  exercised  and  govern- 
mental control  was  assumed  for  war  purposes,  the  read- 
justment to  conditions  of  peace  must  of  course  be  effected 
gradually  and  with  the  circumspection  essential  to  the  pro- 
tection of  all  the  public  and  private  interests  involved.  But 
the  immediate  purpose  should  be  to  readjust  as  soon  as 
may  be,  not  to  use  war  powers  to  control  peace  conditions, 
a  proceeding  essentially  vicious  and  constituting  the  most 
serious  offense  against  our  institutions.  What  changes  we 
shall  desire  to  make  in  order  to  suit  new  conditions  which 
follow  the  war  we  must  make  deliberately  after  discussion 
and  with  proper  authorization.  Peace  policies  must  be 
prosecuted  with  the  authority  and  distribution  of  powers 
and  according  to  the  methods  which  pertain  to  peace. 

The  question  of  government  ownership  and  operation 
is  a  severely  practical  one.  Of  course,  there  are  those 
whose  interests  lie  simply  in  extending  the  activities  of 
Government  so  as  to  embrace  all  industry  and  who  are 
endeavoring  to  proceed  along  what  they  conceive  to  be 
the  line  of  the  least  resistance  in  trying  to  keep  in  govern- 
ment hands  in  time  of  peace  what  has  been  taken  tem- 
porarily by  reason  of  the  exigencies  of  war.  The  in- 


40  Reconstructing  America 

stinct  of  the  American  people  I  believe  can  be  trusted  to 
thwart  the  insidious  plans  of  these  enemies  of  liberty,  who 
if  given  their  way  would  not  stop  short  of  a  tyranny 
which,  whatever  name  it  might  bear,  would  leave  little 
room  for  preference  as  compared  with  Prussianism. 
Passing  the  ambitions  —  which  are  not  to  be  ignored  — 
of  these  pseudo-democrats,  the  question  of  the  govern- 
ment ownership  and  operation  of  railroads  and  other  in- 
strumentalities of  communication  is  really  one  of  effi- 
ciency and  political  control.  So  far  as  investment  is 
concerned,  it  will  exist  in  either  case.  Whether  cor- 
porate bonds  and  stocks,  or  the  fair  value  of  the  prop- 
erties in  government  bonds  with  guaranteed  returns, 
are  held,  makes  little  difference  from  the  standpoint  of 
investment.  Perhaps  the  latter  might  be  preferred  by 
many.  The  important  question  is  not  that  of  invest- 
ment. It  goes  deeper  and  touches  the  service  to  the 
public  and  the  soundness  of  our  political  life. 

Along  with  this  is  the  grave  question  of  putting  the 
direct  operation  of  these  great  activities  unnecessarily 
under  political  control.  That  is  the  most  serious  ques- 
tion. The  dovetailing  of  Government  with  business 
is  apt  to  injure  both.  Such  is  the  havoc  wrought  by 
political  machines,  demanding  that  position  and  profit 
go  with  political  favor  and  as  political  reward.  We 
shall  have  quite  enough  of  this  sort  of  thing  in  the 
necessary  extension  of  governmental  activities  without 
courting  additional  difficulties. 

INEFFICIENCY   THE    BLIGHT   OF   PUBLIC   UNDERTAKINGS 

.  It  is  regrettable,  but  it  is  true,  that  governmental 
enterprise  tends  constantly  to  inefficiency.  It  would, 


Government  and  Big  Business          41 

from  any  point  of  view,  be  unsafe  to  take  the  experience 
of  the  last  year  as  a  guide.  The  splendid  stimulus  of 
the  War  Spirit  put  us  at  our  best.  The  general  dis- 
position to  serve  and  to  be  content  made  conditions  ex- 
ceptionally advantageous  for  governmental  experiment. 
Again,  the  situation  in  the  past  year  with  respect  to  the 
movement  of  traffic  has  been  abnormal.  But,  apart 
from  these  considerations,  the  experiment  would  not 
appear  to  afford  a  basis  for  expecting  a  net  balance  of 
benefits  in  government  ownership  and  management. 
I  do  not  mean  to  imply  that  the  record  of  private  enter- 
prise is  an  agreeable  one,  but  on  a  fair  examination  of 
conditions  where  governmental  management  has  been 
maintained,  I  believe  that  from  the  standpoint  of  effi- 
ciency the  comparison  favors  private  enterprises  and 
that  in  this  country  we  cannot  afford  to  ignore  the  fact 
that  inefficiency  is  the  blight  upon  our  public  un- 
dertakings. It  cannot  fail  to  be  observed  that  even 
in  connection  with  the  war,  despite  the  endeavor  and 
patriotic  impulse  of  countless  workers,  inefficiency  in 
important  fields  of  activity  has  been  notorious.  The 
notion  that  the  conduct  of  business  by  Government 
tends  to  be  efficient  is  a  superstition  cherished  by  those 
who  either  know  nothing  of  Government  or  know  noth- 
ing of  business.  The  tendency  is  strongly  the  other  way. 
There  is  just  as  much  danger  to  our  prosperity  in 
undue  decentralization  as  in  over-centralization.  Take 
our  railroads  as  an  example.  If  we  are  not  to  have 
government  ownership,  we  must  have  a  sensible  plan 
of  regulation.  We  must  have  a  plan  of  regulation 
which  will  permit  sound  credit  and  growth,  which 
will  stabilize  securities'  and  offer  inducements  for  in- 


42  Reconstructing:  America 

vestment,  while  insuring  adequate  service  at  reason- 
able rates.  The  democracy  saved  by  a  world  war  ought 
to  be  able  to  supervise  great  undertakings  in  a  fashion 
which  will  really  serve  the  common  interest.  Regula- 
tion which  does  not  promote  efficiency  is  self-condemned ; 
and  with  respect  to  interstate  carriers,  State  lines  are 
not  economic  lines.  Congress  should  provide,  as  it 
has  power  to  provide  —  aside  from  war  powers  —  a 
comprehensive  plan  of  regulation  with  relation  to  dis- 
tricts corresponding  to  the  broad  divisions  of  actual 
operations,  and  the  entire  field  of  the  activities  of  inter- 
state carriers  should  be  covered  appropriately  by  rec- 
ognition of  the  interdependence  of  through  and  local 
rates,  and  of  the  interblending  of  operations  in  the  con- 
duct of  interstate  and  local  business,  so  that  in  the 
exercise  of  the  dominant  power  of  Congress  for  the  pro- 
tection of  interstate  commerce,  all  conflicting  regula- 
tions would  be  avoided  and  the  basis  of  efficiency  secured. 

HOW   TO   SAVE   OUR   PROSPERITY 

But  in  endeavoring  to  escape  the  evils  which  are 
likely  to  attend  upon  government  ownership  and  manage- 
ment, it  is  folly  to  go  to  the  other  extreme  and  to  sacri- 
fice the  advantages  and  economy  which  cooperation  in 
these  activities  may  afford.  Reasonable  opportunity 
for  concert  under  government  supervision  is  necessary 
to  afford  the  best  service  and  prevent  waste,  and  if  we 
have  learned  this  lesson  from  recent  experiences  it  will 
be  a  great  gain. 

And  again,  if  we  are  to  look  forward  to  the  common 
prosperity  and  lay  the  foundation  for  the  individual 
betterment  of  men,  women,  and  children  which  cannot  be 


Government  and  Big  Business         43 

secured  except  by  success  in  production  and  exchange, 
we  must  give  a  freer  course  to  cooperation  in  industry. 
The  war  has  compelled  cooperation,  and  the  Govern- 
ment, under  this  compulsion,  has  fostered  what  is  pre- 
viously denounced  as  criminal.  The  conduct  which  had 
been  condemned  by  the  law  as  a  public  offense  was 
found  to  be  necessary  for  the  salvation  of  the  Republic. 
But  the  public  need  so  dramatically  disclosed  by  the  war 
is  not,  in  this  respect,  removed  by  the  termination  of 
the  war.  Cooperation  is  just  as  necessary  to  secure  the 
full  benefits  of  peace  as  it  was  to  meet  the  exigencies  of 
war.  And  without  it  we  shall  miss  the  great  prosperity 
and  advance  in  trade  to  which  with  our  skill  and  energy 
we  are  entitled. 

We  have  had  the  experience  of  many  years  in  trying 
to  impose  rules  of  uncertain  scope  with  respect  to  re- 
straint of  trade.  Lawyers  have  been  unable  to  tell  their 
clients  whether  proposed  conduct  would  elicit  the  praise 
due  to  a  conspicuous  business  success  with  correspond- 
ing gain  to  the  community,  or  would  land  them  in  jail. 
Of  course  we  cannot  go  forth  to  win  our  proper  place  in 
the  world's  trade  under  such  uncertainties  and  restric- 
tions. And  it  is  idle  to  talk  of  removing  economic 
barriers  abroad  while  maintaining  them  at  home.  In 
the  first  place,  the  mere  size  of  a  business  does  not 
warrant  its  condemnation.  Mere  size  may  carry  the 
germs  of  dissolution,  but  if  it  means  soundness  of  or- 
ganization and  economic  strength  we  need  it,  provided 
there  is  proper  supervision  to  prevent  abuses.  Wrong- 
doing, and  not  a  mere  conception  of  power,  should  be 
the'  basis  of  governmental  restraint  and  prohibition. 
All  power  that  can  be  used  can  be  mischievous.  If  we 


44  Reconstructing  America 

aim  at  actual  wrongs,  we  shall  be  more  successful  than 
if  we  attack  bogies.  Define  and  punish  wrong,  but 
free  commerce  from  being  hampered  by  fear  of  con- 
structive evils. 

Is  it  not  entirely  possible  to  maintain  governmental 
supervision  which  will  give  reasonable  opportunity  for 
doing  reasonable  things  instead  of  seeking  to  maintain 
rules  of  conduct  which  shackle  American  enterprise? 
Neither  labor  nor  the  general  public  gains  anything  from 
denying  free  scope  to  honest  business,  and  to  secure  this 
legitimate  freedom  it  should  be  the  function  of  Govern- 
ment to  provide  intelligent  supervision  which  will  aim 
at  the  detection  and  punishment  of  abuses  and  not  at 
the  crippling  of  opportunities  rightly  used.  The  Webb 
bill  is  but  a  slight  advance.  It  needs  the  background  of 
large  undertakings  and  wide  experience. 

HAVE    WE    THE   HUN    SPIRIT? 

But  whatever  freedom  it  may  have,  American  in- 
dustry will  not  thrive  unless  it  is  instinct  with  the  spirit 
of  justice.  We  have  fought  this  war  to  substitute 
reason  for  force.  We  love  our  Republic  because  it 
represents  to  us  the  promise  of  the  rule  of  reason.  There 
is  no  assurance  of  stability  in  industry  if  it  is  dominated 
by  the  selfish  profiteer,  or  by  men  who  regard  human 
beings  as  mere  economic  units,  or  by  men,  whether 
employers  or  employees,  who  live  with  the  ambition  to 
be  little  Kaisers  ruling  by  their  little  divine  right, 
whether  of  wealth  or  of  "pull"  or  of  any  position  of 
power.  If  we  are  to  establish  peace  within  our  own 
borders,  we  must  cooperate  to  destroy  the  Hunnish 
spirit  of  tyranny  wherever  we  find  it. 


Government  and  Big  Business         45 

There  are  no  difficulties  in  the  field  of  industry  which 
cannot  be  solved  if  we  insist  on  methods  of  justice.  The 
whole  international  aim  is  to  enthrone  justice.  How 
shall  we  hope  to  attain  this  end  among  the  nations  if  we 
cannot  establish  justice  in  our  own  community? 


CHAPTER  III 

PROBLEM  OF  THE   RAILROADS— FROM  THE   GOV- 
ERNMENT'S  VIEWPOINT 

THE  policy  we  shall  adopt  toward  our  railroads  is 
unquestionably  our  foremost  reconstruction  problem. 
For  these  great  arteries  of  travel  and  commerce,  whose 
employees  number  a  tenth  of  our  total  population, 
represent  a  larger  investment  of  money  and  labor  than 
any  other  industry.  Billions  of  dollars  of  private, 
corporate,  and  banking  capital  is  tied  up  in  American 
railroad  bonds  and  shares,  and  the  number  of  investors 
in  this  class  of  security,  here  and  abroad,  is  legion. 
Hence  the  economic  disturbance  occasioned  by  their 
being  taken  over  by  the  Government.  But  Peace  has 
come,  and  now  the  problem  is  —  shall  we  return  the 
roads  to  their  owners ;  retain  them,  as  Mr.  McAdoo  has 
suggested,  five  years  longer  —  or  altogether? 

This  is  the  question  which  President  Wilson  said 
in  his  Message  to  Congress  gave  him  the  "greatest 
concern, "  but  as  to  which  he  "had  no  confident  judgment 
of  his  own, "  and  he  asked  : 

I 

SOME  NEW  RAILROAD  POLICY  NEEDED 

BY  PRESIDENT  WILSON 

What  is  it  right  that  we  should  do  with  the  rail- 
roads, in  the  interest  of  the  public  and  in  fairness  to 

their   owners?  .  .  . 

46 


Problem  of  the  Railroads  47 

We  can  simply  release  the  roads  and  go  back  to  the 
old  conditions  of  private  management,  unrestricted 
competition,  and  multiform  regulation  by  both  State 
and  Federal  authorities ;  or  we  can  go  to  the  opposite 
extreme  and  establish  complete  control,  accompanied, 
if  necessary,  by  actual  Government  ownership ;  or  we 
can  adopt  an  intermediate  course  of  modified  private 
control,  under  a  more  unified  and  affirmative  public 
regulation  and  under  such  alterations  of  the  law  as 
will  permit  wasteful  competition  to  be  avoided  and  a 
considerable  degree  of  unification  of  administration  to 
be  effected,  as,  for  example,  by  regional  corporations, 
under  which  the  railways  of  definable  areas  would  be 
in  effect  combined  in  single  systems. 

The  one  conclusion  that  I  am  ready  to  state  with 
confidence  is  that  it  would  be  a  disservice  alike  to  the 
country  and  to  the  owners  of  the  railroads  to  return 
to  the  old  conditions  unmodified.  Those  are  conditions 
of  restraint  without  development.  There  is  nothing 
affirmative  or  helpful  about  them.  What  the  country 
chiefly  needs  is  that  all  its  means  of  transportation 
should  be  developed,  its  railways,  its  waterways,  its 
highways,  and  its  countryside  roads.  Some  new  ele- 
ment of  policy,  therefore,  is  absolutely  necessary  — 
necessary  for  the  service  of  the  public,  necessary  for 
the  release  of  credit  to  those  who  are  administering 
the  railways,  necessary  for  the  protection  of  their 
security  holders. 

WHY  GOVERNMENT  TOOK  CONTROL 

Why  the  railroads  were  taken  over  is  explained  in 
former  Director-General  j.IcAdou's  last  report.  He 


48  Reconstructing  America 

alleges,  as  the  reasons,  inadequacy  of  terminal  facilities, 
lack  of  coordination  and  use  of  those  in  existence;  a 
paralysis  of  traffic  in  the  falls  of  1916  and  1917,  in  addi- 
tion to  serious  car  shortages.  These  difficulties  were  ac- 
centuated by  inability  to  get  promptly  new  locomotives 
which  had  been  ordered.  There  were  also  labor  troubles 
and  the  financial  situation  of  many  railroads  was  very  pre- 
carious. All  factors  converged  to  bring  about  a  prolonged 
and  serious  transportation  paralysis.  So  the  President 
took  possession  and  control  of  the  railroads  on  Decem- 
ber 28,  1917. 

II 

THE  ADMINISTRATION  FIVE-YEAR  EXTENSION  PLAN 

BY  HON.  WILLIAM   G.   McADOO 

On  December  u,  1918,  just  before  resigning  his  post 
as  Director  General,  Mr.  McAdoo  in  a  letter  to  Judge 
T.  W.  Sims,  Chairman  of  the  House  Interstate  and 
Foreign  Commerce  Committee,  stated  his  views  reflect- 
ing the  policy  of  the  Administration,  on  the  railroad 
problem.  He  said  in  part : 

There  is  one  and  to  my  mind  only  one  practicable 
and  wise  alternative,  and  that  is  to  extend  the  period 
of  Federal  control  from  the  one  year  and  nine  months 
provided  by  the  present  law  to  five  years,  or  until  the 
first  day  of  January,  1924.  This  extension  would  take 
the  railroad  question  out  of  politics  for  a  reasonable 
period.  It  would  give  composure  to  railroad  officers 
and  employees.  It  would  admit  of  the  preparation  and 
carrying  out  of  a  comprehensive  program  of  improve- 
ments of  the  railroads  and  their  terminal  facilities  which 


Problem  of  the  Railroads  49 

would  immensely  increase  the  efficiency  of  the  transport 
machine.  It  would  put  back  of  the  railroads  the  credit 
of  the  United  States  during  the  five-year  period,  so 
that  the  financing  of  these  improvements  could  be  success- 
fully carried  out.  It  would  offer  the  necessary  opportunity 
under  proper  conditions  to  test  the  value  of  unified 
control,  and  the  experience  thus  gained  would  of  itself 
indicate  the  permanent  solution  of  the  railroad  problem. 

The  American  people  have  a  right  to  this  test.  They 
should  not  be  denied  it.  It  is  to  their  interest  that  it 
should  be  done.  In  my  opinion,  it  is  the  only  practicable 
and  reasonable  method  of  determining  the  right  solu- 
tion of  this  grave  economic  problem.  .  .  . 

I  hope  that  the  Congress  in  its  wisdom  will  grant 
a  five-year  period  for  a  test  of  unified  railroad  operation 
under  proper  provisions  of  law  which  will  make  that 
test  effective  and  at  the  same  time  take  the  railroad 
question  out  of  politics  while  the  test  is  being  made. 
Unless  this  is  done,  I  do  not  hesitate  to  say  the  railroads 
should  be  returned  to  private  ownership  at  the  earliest 
possible  moment.  The  President  has  given  me  per- 
mission to  say  that  this  conclusion  accords  with  his  own 
view  of  the  matter. 

Ill 

PRIVATE  OWNERSHIP  UNDER  CLOSE  FEDERAL  CONTROL 
AFTER  FIVE  YEARS 

Bv  DIRECTOR-GENERAL  HINES 

Of  the  Railroad  Administration 

From  every  standpoint,  I  believe  it  is  in  the  public 
interest  that  there  should  be  an  extension  of  control 


50  Reconstructing  America 

to  Jan.  i,  1924.  This  will  insure  public  service  in  the 
meantime  under  the  best  conditions  of  public  control, 
instead  of  under  the  worst  conditions  of  private  con- 
trol. 

It  will  give  opportunity  for  adoption  of  a  permanent 
solution  under  conditions  most  favorable  to  perfectly 
fair  consideration  of  every  proposal,  instead  of  forcing 
a  solution  in  a  period  when  the  advocates  of  a  greater 
social  control  are  at  a  temporary  disadvantage.  It 
will  make  it  practicable  to  have  the  results  of  normal 
operations  under  Government  control,  which,  in  my 
opinion,  will  not  be  practicable  prior  to  March,  1921, 
when  the  results  of  the  year  1920,  as  well  as  the  results 
of  the  year  1919,  will  be  available. 

It  will  relieve  labor  of  the  highly  unfair  inferences 
that  are  now  drawn  from  the  costs  of  railroad  operation 
under  Government  control.  It  will  give  an  opportunity 
to  give  a  fair  test  to  the  proper  coordination  of  rail- 
roads and  inland  waterways.  It  will  not  prejudice 
any  legitimate  interest  in  any  way.  Meantime,  it 
will  leave  the  President  in  a  position  where  he  can  per- 
form his  primary  executive  function  involved,  that  of 
rendering  the  transportation  service  under  favorable 
conditions,  rather  than  under  conditions  of  the  most 
unfavorable  and  difficult  character. 

CAPITALIZED   AT   REAL   VALUE 

It  may  be  said  that  my  observations  necessarily 
lead  to  Government  ownership  and  operation.  I  do 
not  think  ;  so  I  believe  all  the  objects  which  I  think  must 
be  achieved  to  obtain  a  permanent  solution  can  be 
accomplished  through  the  creation  of  a  comparatively 


Problem  of  the  Railroads  51 

few  railroad  companies  which  will  have  capitalization 
equal  only  to  the  real  value  of  the  property,  and  which 
will  have  a  moderate  guaranteed  return  with  the  right 
to  participate  moderately  in  any  additional  profits. 

My  prediction  is  that  the  more  this  subject  is  dis- 
cussed the  more  apparent  it  will  become  that  the  advan- 
tages of  the  proposed  plan  of  private  management 
through  the  multiplicity  of  old  railroad  corporations  is 
wholly  illusory  and  ought  not  to  be  adopted,  and  that 
the  subject  must  be  dealt  with  in  the  radical  and  funda- 
mental way  which  I  have  pointed  out. 

I  am  forced  to  the  conclusion  either  that  there  will 
be  no  comprehensive  legislation  in  the  next  two  years, 
or  that  any  legislation  adopted  will  be  as  much  like  the 
present  system  as  to  offer  no  hope  for  a  permanent 
solution.  If,  therefore,  my  opinion  is  asked  as  to  the 
propriety  of  retaining  the  railroads  under  Federal 
control  to  facilitate  a  satisfactory,  permanent  solution, 
my  reply  is  that  from  that  standpoint  we  had  better 
terminate  the  control  and  go  back  promptly  to  the  old 
system,  or  we  should  extend  the  control  long  enough  to 
admit  of  an  adequate  opportunity  to  adopt  a  radical 
and  new  system  which  will  really  bring  about  a  ncrma- 
nent  solution. 

I  do  not  personally  believe  in  Government  ownership. 
I  believe  there  can  be  a  form  of  radically  reconstructed 
private  ownership  with  such  close  Government  super- 
vision, including  Government  representation  on  the 
boards  of  directors,  as  will  give  the  public  and  labor  all 
the  benefits  of  Government  ownership  and  at  the  same 
time  will  preserve  the  benefits  of  private  and  self-inter- 
ested initiative  and  will  avoid  the  political  difficulties 


52  Reconstructing  America 

which  perhaps  are  inseparable  from  Government  own- 
ership. 

I  do  not  believe  the  plans  now  before  the  committee 
which  contemplate  turning  the  railroads  back  to  manage- 
ment by  the  numerous  railroad  corporations  of  the 
past  will  meet  the  fundamental  difficulties,  and  I  believe 
the  more  thoroughly  the  subject  is  explored  the  more 
this  will  be  appreciated,  and  that  it  will  develop  by 
degrees  that  a  far  more  radical  treatment  will  be  needed 
and  that  this  treatment  cannot  be  accorded  in  the 
crowded  period  of  the  next  two  years. 

SPEAKS   ONLY   FOR   HIMSELF 

On  account  of  my  responsibility  as  Director  General, 
I  believe  it  will  be  excusable  in  me  to  lay  before  you  my 
personal  views  as  to  the  permanent  solution  of  the 
railroad  problem.  I  must  emphasize  that  I  speak 
only  for  myself.  I  do  not  conceive  it  to  be  my  function 
to  attempt  to  bring  about  one  solution  rather  than 
another,  but  I  feel  that  convictions  which  are  the  result 
of  long  years  of  contact  with  the  subject  may  be  of 
some  value  as  emphasizing  some  of  the  leading  require- 
ments which  I  believe  must  be  fairly  faced  and  met  be- 
fore we  can  reach  a  solution  which  will  be  reasonably 
satisfactory  to  the  American  public. 

These  conclusions  on  my  part  constitute  a  process 
of  evolution.  I  started  out  believing  that  practically 
no  public  regulation  was  necessary.  I  came  to  appre- 
ciate the  necessity  and  value  of  the  strictest  public 
regulation.  For  a  long  time  I  believed  that  the  great 
number  of  railroad  companies  in  this  country,  despite 
their  differences  in  circumstances  and  ability,  could 


Problem  of  the  Railroads 


53 


work  out  their  own  salvation  and  render  an  adequate 
public  service.  I  have  been  driven,  however,  by  my 
contact  with  the  subject  to  the  conviction  that  this  is 
not  the  case  and  that  there  must  be  a  radical  recon- 
struction of  the  whole  scheme  of  private  ownership 
and  management  if  we  are  to  avoid  Government  owner- 
ship. .  .  . 

I  wish  to  remove,  if  possible,  any  thought  that  my 
views  on  the  duration  of  Federal  control  involve  either 
directly  or  indirectly,  nearly  or  remotely,  the  notion 
that  Congress  can  or  ought  to  be  influenced  to  order  an 
extension  of  Federal  control  for  fear  that  unless  the 
extension  shall  be  granted  the  railroads  will  be  relin- 
quished without  due  regard  to  the  public  interest.  I 
view  the  question  absolutely  from  the  standpoint  of  the 
public  interest.  I  believe  I  will  be  able  to  show  that 
unless  a  reasonable  extension  shall  be  granted  it  will 
be  contrary  to  the  public  interest  to  hold  the  railroads 
for  the  full  twenty-one  months.  But  I  concede  fully 
and  without  qualification  that  the  procedure  is  to  be 
tested  solely  by  the  public  interest,  and  it  seems  to 
me  unthinkable  that  any  suggestion  of  early  relinquish- 
ment  should  be  put  forward  as  a  leverage  for  forcing  an 
extension. 


RAILROAD  EARNINGS  IN  1918  SHOW  BIG  DECREASE 


YEAR  ENDING  DEC.  31,  1918. 


Atchison,       Topcka      & 

Gross. 

Increase. 

Net. 
Sio  7oS  j}<: 

Decrease. 

g.  68.1  -,  ,,o 

Baltimore  &  Ohio  . 
Chesapeake  &  Ohio     . 
Chicago  &  Northwestern 

174,191,448 
7.5,720,797 
127,205,678 

40,578,127 
19,077,00,5 
19,0,50,695 

8,795,292 
17,645,994 
12,272,957 

186,646 

2,764,579 
12,177,980 

54 


Reconstructing  America 


RAILROAD  EARNINGS  IN  igiS  SHOW  BIG  DECREASE  (Continued) 


YEAR  ENDING  DEC.  31,  1918. 


Gross. 

Increase. 

Net. 

Decrease. 

Chicago,    Milwaukee    & 

St.  Paul     

132,894,455 

19,155,253 

4,467,774 

18,035,778 

Denver  &  Rio  Grande     . 

31,356,214 

2,929,076 

4,858,526 

2,603,740 

Delaware,     Lackawanna 

&  Western      .... 

68,740,076 

11,528,852 

15,853,905 

2,603,740 

Erie     

87,855,46i 

16,873,242 

22,  147,  226 

9,914,981 

Great  Northern      .     .     . 

100,661,067 

12,126,904 

10,639,228 

12,348,318 

Illinois  Central  .... 

107,320,262 

20,175,474 

12,085,073 

7,922,009 

Lehigh  Valley    .... 

65,586,769 

12,228,323 

6,364,382 

3,211,614 

Louisville  &  Nashville     . 

101,392,792 

24,485,405 

18,500,668 

2,203,287 

New  York  Central      .     . 

294,191,313 

55,861,514 

50,299,060 

6,353,023 

New  Haven  

102,294,212 

16,509,319 

1  1,315,532 

9,156,535 

Norfolk  &  Western     .     . 

82,004,034 

16,093,792 

17,510,839 

4,275-418 

Pennsylvania  Railroad    . 

367,414,694 

77,180,602 

23,149,178 

31,447,052 

Seaboard  

38,923,106 

8,577,960 

4,096,959 

3,140,922 

Southern  Pacific     .     .     . 

153,948,641 

21,691,085 

33,127,096 

9,363,250 

Southern  Railway  .     .     . 

126,574,297 

35,857,728 

30,976,625 

3.933,752 

Union  Pacific     .... 

98,443,365 

21,454,942 

35,114-379 

7,484,812 

Wabash    

48,246,41  1 

7,774,413 

6,79O,9IO 

3,752,972 

CHAPTER  IV 
EXPERT    OPINION    ON    THE    RAILROAD    QUESTION 

I 
WHY  THE  ROADS  CANNOT  BE  TURNED  BACK 

BY  CONGRESSMAN  SIMEON  D.   FESS 

THE  Ohio  Congressman,  Simeon  D.  Fess,  chairman 
of  the  Republican  National  Congressional  Committee 
and  a  candidate  for  Speaker  of  the  House,  has  the  courage 
of  his  convictions  on  several  reconstruction  problems, 
especially  railroads.  In  his  view  the  law  compels  compe- 
tition, and : 

The  roads  cannot  be  turned  back  to  their  owners 
and  operated  successfully  under  the  limitations  of 
law  as  it  now  stands.  The  owners  know  that  as  well 
or  better  than  any  one  else.  The  Sherman  law  com- 
pels competition  when  every  consideration  of  economy 
and  efficiency  argues  concentration.  This  prevents 
not  only  maximum  service,  but  entails  maximum  econ- 
omy as  well  as  efficiency. 

Laws  like  the  Adamson  bill  of  August,  1916,  deny 
the  owner  the  right  of  contract  by  fixing  the  scale  of 
wages  the  owners  must  pay  for  operation  without 
regard  to  the  contract  existing  between  employer  and 
employee.  This  virtually  takes  from  the  responsible 
party  to  the  contract  the  right  to  determine  the  cost 
of  operation  of  his  property. 

55 


56  Reconstructing  America 

On  the  other  hand,  the  Interstate  Commerce  Com- 
mission, exercising  its  power,  denies  the  obligor  to  the 
contract  the  right  to  fix  the  rate  of  transportation, 
which  is  the  source  of  income  out  of  which  must  be 
paid  the  expense  of  operation. 

In  this  way  one  governmental  body  fixes  the  outlay 
and  another  governmental  body  fixes  the  income,  and 
the  owners  are  left  to  pay  the  bills  as  best  they  can. 
The  properties  must  inevitably  deteriorate  under 
such  handicap,  and  securities  depreciate.  Needed  im- 
provements must  be  deferred  and  repairs  neglected. 
Hence  instead  of  the  system  growing  with  the  needs 
of  a  growing  country  it  sees  depleted  roadbeds,  deteri- 
orated rolling  stock,  and  some  phases  of  disorganiza- 
tion of  transportation. 

GREAT   INCREASE   IN  EXPENSES 

The  public  mind  cannot  be  brought  to  a  repeal  of 
these  restrictive  laws,  unless  some  other  safeguards 
are  thrown  about  the  operation  on  behalf  of  the  public. 
Notwithstanding  the  fact  that  in  the  four  years  from 
1912  to  1916  over  400  laws  were  enacted  by  States 
and  nation  in  regulation  of  the  rail  business  I  take  it 
that  the  laws  must  stand  until  superseded  by  others, 
hence  it  is  folly  to  talk  about  turning  the  roads  back 
to  the  owners  as  before  the  war. 

Since  they  have  been  taken  over  the  operating  ex- 
penses have  been  increased  amazingly,  largely  because 
the  treasury  which  supplies  the  money  is  inexhausti- 
ble, being  the  National  Treasury.  Some  of  these 
expenses  will  most  likely  remain.  The  country  wit- 
nesses the  business  spectacle  of  seeing  the  largest  freight 


Expert  Opinion  on  the  Railroad  Question    57 

and  passenger  traffic  in  the  history  of  transportation, 
the  highest  rates  paid  by  the  public  —  in  a  word,  the 
greatest  income  of  the  business  —  with  a  deficit  of  at 
least  $200,000,000  to  be  cared  for  out  of  the  National 
Treasury. 

What  about  Government  ownership  and  operation? 
I  am  very  frank  to  say  I  am  not  satisfied  with  this 
remedy,  and  I  will  indicate  my  reasons. 

The  public  has  an  interest  in  transportation,  for 
which  the  roads  exist.  They  can  no  longer  be  looked 
upon  as  property  to  be  operated  for  the  profit  of  the 
owners  without  regard  to  the  rights  of  the  public. 
Hence  the  public  has  an  inherent  right  to  demand  ser- 
vice. Its  chief  interest  is  service  economically  and 
efficiently  rendered. 

As  to  economy,  of  course,  no  man  of  judgment  will 
say  the  Government  is  ever  economic.  It  is  the  most 
wasteful  and  slovenly  in  its  business  operations  known 
to  the  business  world.  While  Government  work  is 
done  on  contract  basis,  no  one  pretends  to  hold  the 
Government  to  its  contracts  either  in  time  of  completion 
of  the  work  or  amount  to  be  paid  for  it.  Just  now 
members  of  Congress  and  the  public  are  exercised 
over  the  report  of  the  Hog  Island  investigation,  which 
shows  that  the  contract  price,  at  first  fixed  at  $21,000,000, 
then  raised  to  $27,000,000,  will  reach  $61,000,000.  Here 
is  a  discrepancy  of  $34,000,000,  or,  expressed  in  per  cent, 
an  outlay  which  is  300  per  cent  over  the  contract 
price. 

PUBLIC    EXCUSES    GOVERNMENT 

The  enormity  is  not  in  the  fact  of  this  discrepancy, 
but  in  the  ease  with  which  the  public  will  at  once  dis- 


58  Reconstructing  America 

miss  it  with  the  excuse  that  it  is  for  the  Government, 
and  why  complain.  This  lack  of  the  sense  of  economy, 
which  naturally  and  inevitably  excuses  wastefulness, 
which  under  private  contract  would  lead  to  immedi- 
ate prosecution,  is  the  one  outstanding  indictment 
against  Government  ownership  and  operation  where  it 
can  be  done  through  private  enterprise.  .  .  . 

My  own  opinion  is  that  neither  complete  private 
ownership  nor  Government  ownership  is  the  wise  way. 
Both  of  these  methods  have  some  virtues.  We  must 
find  a  way  which  will  include  the  good  of  the  two  but 
avoid  the  dangers  of  both.  This  is  the  problem.  Under 
Government  operation  the  single  system  idea,  with 
common  terminals,  union  ticket  offices,  employment 
of  short  hauls,  no  matter  on  which  line  the  traffic  goes, 
are  all  valuable  changes  which  in  the  interest  of  the 
public  should  be  retained. 

Consequently,  our  legislation  should  permit  the  roads 
to  pool  their  properties.  This  would  necessitate  amend- 
ment, if  not  repeal,  of  the  Sherman  law.  The  growing 
demands  upon  transportation  with  the  tremendous 
growth  of  the  country  will  demand  new  developments 
of  rail  facilities  which  will  entail  great  outlay  of  money. 
This  will  demand  ready  market  for  rail  securities. 
This  market  will  depend  upon  the  prospect  of  the  rail- 
way enterprise  as  a  successful  business. 

The  properties  must  be  secured  for  the  sake  of  secur- 
ing holders,  and  the  public  must  be  secured  against 
fictitious  values  in  watered  stock.  Hence  the  Govern- 
ment must  regulate  the  issuance  of  securities  and  at  the 
same  time  permit  such  profit  to  security  holders  as 
to  secure  a  ready  market  for  the  bonds.  It  has  been 


Expert  Opinion  on  the  Railroad  Question    59 

suggested  that  under  regulation  the  holder  might  be 
guaranteed  a  fixed  profit  on  his  securities.  This  regu- 
latory feature  necessitates  Government  supervision  of 
some  sort  to  guarantee  needed  improvements  without 
injury  to  the  public  either  in  watered  stock  or  under 
charges  in  traffic. 

To  do  this  there  must  be  recognized  a  regulatory 
function,  but  it  must  not  reach  strangulation,  as  in  the 
case  of  the  Interstate  Commerce  Commission  prior  to 
the  war. 

There  must  be  guaranteed  by  law  that  the  power 
which  fixes  the  expense  of  operation  must  also  fix  the 
income,  to  insure  that  the  two  will  have  a  definite  busi- 
ness relation.  Congress  cannot  fix  the  outgo  and  the 
Interstate  Commerce  Commission  the  income.  These 
matters  should  be  left  to  the  business  administration 
rather  than  political  utilities  or  commissions. 

Where  the  roads  broke  down  before  was  not  because 
of  private  ownership  so  much  as  through  Government 
regulation.  On  behalf  of  the  public  the  matter  of 
operating  expenses  became  a  political  issue  in  which 
contractual  relations  were  not  regarded.  This  must  be 
avoided. 

The  most  feasible  way  to  secure  the  importance  of 
private  ownership  and  also  Government  operation 
without  embracing  the  dangers  incident  to  both  would 
be  private  ownership  under  Government  control.  This 
is  the  order  of  the  day  in  the  industrial  world.  It  is 
frequently  worded  "  concentration  and  control."  This 
will  permit  the  roads  to  be  returned  to  the  owners  to 
be  operated  under  rigid  Government  control.  It 
would  necessitate  the  combination  of  the  systems  into 


60  Reconstructing  America 

one  or  into  regional  systems  to  be  operated  as  one. 
This  would  demand  the  repeal  of  the  Sherman  law. 

PUBLIC  THE  CHIEF  FACTOR 

The  owners  must  relinquish  the  claims  that  the  roads 
are  private  and  will  be  run  for  profit.  That  stage  is 
long  past.  The  brotherhoods  must  also  relinquish  the 
claim  that  the  roads  are  run  to  employ  men  at  good 
wages.  The  public  or  third  party  in  the  deal  must  be 
considered  and  will  in  the  end  become  the  chief  factor 
in  the  determination  of  the  policy.  This  is  right, 
since  it  is  the  public  which  makes  possible  the  enter- 
prise. 

While  the  Government  is  concerned  in  maintaining 
the  rights  of  property  and  should  see  to  it  that  these 
rights  are  inviolable,  and  also  concerned  in  the  welfare 
of  the  man  who  toils  and  should  see  to  it  that  his  rights 
are  inviolable,  yet  its  larger  function  is  to  see  to  it 
that  the  rights  of  the  public  are  respected. 

But  if  we  mean  to  maintain  our  system  of  Govern- 
ment we  will  respect  the  element  of  private  ownership, 
individual  initiative,  and  personal  responsibility  in 
the  interest  of  progress  and  economic  efficiency  by 
permitting  concentration,  while  in  the  interest  of  the 
public  at  large  we  must  exercise  a  rigid  Government 
control.  It  seems  to  me  the  solution  of  the  railway 
problem  lies  in  this  direction. 


Expert  Opinion  on  the  Railroad  Question    61 

II 

CONSOLIDATE  THE  RAILROADS  ACCORDING  TO  TRAFFIC 
REGIONS 

BY  FRANK  A.  VANDERLIP 

President  National  City  Bank 

Mr.  Vanderlip  thinks  Government  control  of  the 
railroads  will  continue  at  least  twenty-one  months 
after  the  signing  of  Peace ;  also  that  rates  should  con- 
tinue to  be  Federal  controlled,  "but  we  must  still  have 
the  business  profitable  enough  to  attract  capital." 
He  says  further : 

It  has  been  suggested  that  roads  should  be  permitted 
to  come  together  in  regional  districts,  and  the  analogy 
of  the  Federal  Reserve  Bank  has  been  put  forward  as 
illustrating  what  might  be  done  in  the  case  of  railroads. 
I  believe  the  best  thought  is  in  that  direction  now,  but 
not  quite  parallel  to  the  suggestion  of  the  analogy  of 
the  Federal  Reserve  Districts.  The  districts  should 
hardly  be  geographical  so  much  as  they  are  along  the 
lines  of  traffic  —  along  the  flow  of  traffic.  It  might 
be  permitted  that  the  New  York  Central  form  one  re- 
gion, the  Pennsylvania  (a  competing  road,  running 
through  parallel  territory  at  some  distance)  might  form 
another  region,  and  each  of  these  roads  be  permitted 
to  take  in  any  roads  within  their  territory. 

CONSOLIDATION   NECESSARY 

It  seems  absolutely  necessary  that  roads  be  permitted 
to  consolidate  in  this  way  because  a  rate  must  be  made 
that  is  a  fair  average  for  the  roads  rather  than  one  that 


Reconstructing  America 


is  high  enough  for  the  poorest  road  to  live  under.  If 
you  make  a  rate  that  is  high  enough  for  the  poorest 
road  to  live  under  it  is  too  high  for  the  best  located  road. 
If  it  is  low  enough  to  be  applicable  to  the  best  located 
road,  it  will  be  so  low  that  the  other  road  will  go  into 
bankruptcy.  So  it  seems  to  me  necessary  to  put  these 
roads  together  in  districts  so  that  a  rate  may  be  made 
which  is  a  fair  average  rate  for  the  several  roads  in  the 
district.  I  believe  that  some  plan  along  that  line  is 
likely  to  be  the  form  that  a  generally  accepted  railroad 
act  will  take. 

INVESTORS   SHUNNING  RAILS 

We  must  continue  the  Federal  control  of  rates  and 
still  we  must  have  the  business  profitable  enough  further 
to  attract  capital.  Remember  that  the  roads  attracted 
no  capital,  literally  no  capital,  for  several  years.  They 
were  able  to  borrow  money,  although  with  increasing 
difficulty,  but  there  were  no  new  roads  floating  their 
new  stock  to  investors.  Investors  declined  partner- 
ship in  the  railroad  business  in  respect  to  any  new  ven- 
ture. Of  course,  companies  with  existing  stocks  found 
investors  who  traded  in  those  stocks  ;  but  the  aug- 
menting of  railroad  capital  came  through  bond  issues 
and  not  from  people  who  wanted  to  be  partners  in  the 
enterprise.  We  must  have  a  situation  which  will 
attract  capital  so  that  the  great  development  that 
should  go  on  —  a  development  that  has  been  estimated 
as  equal  to  $1,000,000,000  a  year  —  can  be  permitted 
to  go  on  by  the  raising  of  fresh  funds. 


Expert  Opinion  on  the  Railroad  Question    63 

III 

GOVERNMENT  OWNERSHIP  A  DETRIMENT 

BY  OTTO  H.   KAHN 

Mr.  Otto  H.  Kahn  opposes  Federal  control  and  also 
Mr.  McAdoo's  plan.  He  says  : 

From  the  point  of  view  of  the  monetary  interest 
of  the  investor  in  railroad  securities,  the  prospect  of 
Government  ownership  and  operation,  which  would 
relieve  him  of  risk  and  make  his  income  stable  and  secure, 
may  be  attractive.  In  fact,  I  know  that  several  large 
holders  of  railroad  stocks  and  bonds  are  in  favor  of  that 
course,  because  they  believe  it  to  be  advantageous  to  the 
maintenance  of  the  value  of  their  investments. 

From  the  national  point  of  view,  however,  I  consider 
Government  ownership  and  operation  as  gravely  and 
far-reachingly  detrimental  —  socially,  economically,  and 
politically.  It  is  incompatible  with  our  system  and 
methods  of  government  and  with  the  genius  of  American 
institutions. 

It  would  mean  lessened  efficiency,  and  lead  to  stagna- 
tion and  retrogression.  It  would  mean  the  setting  up  of 
a  huge  bureaucratic  machine,  political  wirepulling  and 
logrolling,  largely  increased  cost  to  the  merchant  and 
farmer,  indeed  largely  increased  cost  all  round,  and 
many  other  evils.  Any  one  who  will  study  the  universal 
experience  of  railroading  under  Government  operation 
in  other  democratic  countries,  subject  to  the  frequent 
administrative  changes  necessarily  incident  to  free 
government,  or  who  will  compare  the  excellence  and 
progressive-ness  of  our  privately  managed  telephone 


64  Reconstructing  America 

service,  for  instance,  with  the  indifference  and  utter 
lack  of  progress  of  our  postal  service  under  Democratic 
as  well  as  Republican  administration,  or  will  reflect 
upon  the  causes  for  the  apparently  incorrigible  short- 
comings of  our  municipal  governments,  is  bound,  it 
seems  to  me,  to  realize  that  Government  ownership 
and  operation  should  not  be  introduced  in  this  country 
unless  there  is  a  real  necessity  for  it. 

NO   NECESSITY   FOR   GOVERNMENT   OWNERSHIP 

There  is,  however,  no  such  necessity  whatever. 
We  are  in  the  fortunate  situation  of  being  able,  through 
constructive  legislation  providing  among  other  things 
for  strong  but  not  strangling  Government  regulation 
and  supervision,  to  correct  such  shortcomings  in  the 
system  and  methods  of  private  railroad  management 
as  experience  has  disclosed,  and  to  secure  for  the  public 
practically  all  the  tangible  advantages  which  are  claimed 
in  favor  of  Government  operation,  without  depriving 
the  nation  of  the  inestimable  advantage  of  private 
initiative  and  enterprise  and  competitive  service. 

If  Government  operation  is  continued  for  five  years, 
a  situation  will  have  been  created  financially  and  other- 
wise which,  I  believe,  inevitably  means  permanent 
Government  operation,  or  which  means  at  the  very 
least  that  the  return  to  private  management  could 
only  be  accomplished  after  a  period  of  turmoil,  distress, 
bitterness,  and  heavy  loss,  and  in  the  face  of  immense 
difficulties. 

Legislation  to  correct  the  shortcomings  and  incon- 
gruities of  the  present  railroad  situation  and  to  establish 
a  system  of  railroading  advantageous  to  the  public  and 


Expert  Opinion  on  the  Railroad  Question    65 

fair  to  the  railroads  offers  no  problem  of  excessive  diffi- 
culty. Such  legislation  can  be  had  —  if  at  all  —  within 
two  years  just  as  well  as  within  five  years.  In  fact, 
it  is  more  likely  to  be  obtained  within  the  shorter  than 
within  the  longer  period. 

( 

DANGER   OF   RETURN   TO   PRIVATE   MANAGEMENT 

To  return  the  railroads  to  private  management,  espe- 
cially after  the  grave  changes  which  Governmental  ad- 
ministration has  wrought  in  their  status,  without  ade- 
quate legislation  would  lead  to  serious  financial  and 
economic  disturbances,  affecting  the  entire  structure 
of  national  credit. 

I  know  of  no  compelling  reason  of  public  policy  for 
returning  the  railroads  to  private  management  in  the 
immediate  future.  To  take  this  step  without  such 
compelling  reason  and  without  first  having  given  Con- 
gress an  adequate  opportunity  to  legislate,  would  place 
the  whole  burden  of  responsibility  for  the  resulting 
disturbance  and  national  damage  upon  the  Adminis- 
tration —  a  burden  so  heavy  that  I  cannot  but  feel  any 
government  and  any  party  would  shrink  from  assuming 
it. 

MR.  SCHIFF'S  EXCELLENT  SUGGESTION 

If  the  President,  as  suggested  in  Mr.  Jacob  H.  Schiff's 
recent  telegram  to  the  Director-General  of  Railroads, 
were  to  announce  that  in  accordance  with  the  provisions 
of  the  existing  law  he  will  return  the  railroads  to  private 
management,  that  he  will  do  so  as  soon  as  appropriate 
remedial  and  reformatory  legislation  has  been  enacted, 
but  that  he  will  do  so  in  any  event  with  or  without  such 
legislation  on  January  i,  1921,  then  the  public,  the  rail- 


66  Reconstructing  America 

/ 

roads,  and  Congress  will  be  under  definite  notice,  and 
if  in  the  face  of  such  notice  no  appropriate  legislation 
is  enacted  before  January  i,  1921,  the  responsibility 
for  the  resulting  consequences  will  rest  where  it  properly 
belongs. 

Incidentally,  this  would  have  the  advantage  of  pre- 
venting the  railroad  question  from  becoming  an  acute 
political  issue  in  the  presidential  campaign  of  1920. 
That  question  involves  not  a  political  but  an  economic 
and  business  problem  and  ought  to  be  treated  as  such 
'sine  ira  et  studio.'  It  is  not  now  and  it  is  to  be  hoped 
that  it  may  not  become  a  party  question  as  between 
our  two  great  political  parties. 

IV 

ADVICE  OF  THE  ASSOCIATION  OF  AMERICAN  RAILWAY 
EXECUTIVES 

BY  T.   DEWITT   CUYLER 

The  report  of  American  railroad  executives,  as  pre- 
sented by  Mr.  T.  DeWitt  Cuyler,  chairman  of  the 
Association  of  Railway  Executives,  advises  that : 

Private  ownership,  management,  and  operation  of  the 
American  railways  be  continued. 

Power  of  regulation,  including  all  rates,  should  be 
in  the  hands  of  the  national  government ;  but  these 
functions  should  be  administered  through  governmental 
machinery  responsive  to  the  needs  of  the  people  of  the 
several  States.  State  commissions  should  not  be  inter- 
fered with  by  the  federal  act,  except  so  far  as  necessary 
to  carry  out  the  purpose  mentioned. 


Expert  Opinion  on  the  Railroad  Question    67 

RESTRICTIONS   OF   COMMISSION 

The  Interstate  Commerce  Commission  should  be 
relieved  from  its  executive  and  administrative  duties, 
except  as  to  Federal  valuation  and  as  to  accounting,  and 
should  act  as  a  quasi- judicial  body  clothed  with  authority 
to  pass  upon  all  questions  concerning  the  reasonableness 
and  adequacy  of  rates  and  concerning  discriminations 
coming  before  it  on  complaint  of  any  party  interested, 
or  referred  to  it  as  hereinafter  provided. 

A  department  of  transportation  should  be  created, 
the  head  of  which  should  be  known  as  the  Secretary 
of  Transportation.  He  should  be  vested  with  the 
following  powers  and  duties  : 

To  carefully  observe  the  transportation  needs  and 
facilities  of  the  country  and  by  suggestion  and  coopera- 
tion with  the  carriers  and  by  recommendations  from 
time  to  time  to  the  Interstate  Commerce  Commission 
in  respect  to  the  necessity  for  rates  and  revenues  ade- 
quate to  provide  and  maintain  the  proper  service  and 
to  create  the  credit  required  to  meet  the  needs  of  the 
public  for  facilities,  while  at  the  same  time  protecting 
the  just  interests  of  employees,  of  owners,  of  shippers, 
and  of  the  traveling  public ;  to  endeavor  to  insure  the 
provisions  of  adequate  transportation  facilities  for  the 
real  transportation  needs  of  each  situation. 

If  he  find  that  a  carrier  is  at  any  time  so  congested  or 
otherwise  unable  to  properly  handle  its  traffic,  he  should 
have  power  to  distribute  such  traffic  over  other  lines. 

EMERGENCY    COMBINATION 

In  cases  of  serious  national  emergency,  he  should 
have  power  to  direct  that  during  the  continuance  of 


68  Reconstructing  America 

such  emergency  the  carriers  should  coordinate  their 
facilities  and  operations  and  operate  their  properties 
as  a  unified  national  system  on  such  terms  as  he  may 
find  to  be  just  and  reasonable  in  the  public  interest. 
Proper  provision  should  be  made' for  just  compensation 
to  any  carrier  injured  thereby. 

He  should  have  power  to  require  any  carrier  to  dis- 
tribute its  cars  among  its  patrons  in  accordance  with 
their  needs  and  the  public  interest. 

No  new  or  branch  lines  of  railroad  or  large  and  expen- 
sive terminals  should  be  constructed  unless  a  certificate 
of  public  convenience  and  necessity  is  first  obtained 
from  the  Secretary  of  Transportation. 

Carriers  should  have  the  power  to  initiate  rates, 
schedules  of  which  should  be  filed  with  the  Interstate 
Commerce  Commission,  with  the  Secretary  of  Transpor- 
tation, and  with  the  State  Commissions  of  the  States 
in  which  the  rates  are  applicable  and  through  which 
the  carrier  operates ;  and,  if  not  suspended  as  herein- 
after provided,  such  rates  should  become  effective 
thirty  days  after  the  same  have  been  so  filed,  unless 
a  shorter  period  is  in  special  cases  authorized  by  the 
Secretary  of  Transportation. 

In  case  he  disapproves  any  rate  he  may  suspend  it 
for  a  period  not  exceeding  sixty  days,  and  refer  the  same 
to  the  Interstate  Commerce  Commission  for  considera- 
tion. 

The  statute  itself  should  provide  the  rule  of  rate- 
making,  and  should  require  that  rates  be  not  only  what 
has  been  called  reasonable,  but  adequate  and  sufficient 
to  enable  the  carriers  to  provide  safe,  adequate  and  suffi- 
cient service,  to  protect  existing  investment  and  to 


Expert  Opinion  on  the  Railroad  Question    69 

attract  the  new  capital  necessary  in  the  public  interest, 
and  to  that  end  the  statute  should  among  other  things 
specifically  provide  that  the  level  of  rates  must  properly 
reflect  the  cost  of  wages  and  all  other  expenses  incident 
to  the  furnishing  of  transportation. 


EVILS  OF  "REGIONAL  GROUPING" 

BY  JULIUS   KRUTTSCHNITT 

Mr.  Julius  Kruttschnitt,  President  of  the  Southern 
Pacific  Railroad,  does  not  favor  President  Wilson's 
idea  of  "regional  grouping,"  and  he  states  his  case  as 
follows : 

My  objection  to  the  regional  plan  as  I  understand 
it  is  that  it  would  start  with  a  forced  alienation  of  the 
properties  at  what  would  no  doubt  be  a  sacrifice  of 
values,  and  would  result  in  a  practical  destruction  of 
all  competition.  For  what  purpose?  Apparently,  for 
the  purpose  of  securing  the  benefits  of  unified  control 
and  the  efficiency  of  Federal  operation. 

BENEFITS    OF   PRIVATE    CONTROL 

Is  it  not  well  to  ask  whether  the  price  to  be  paid  for 
these  benefits  is  not  too  high,  and  whether  they  cannot 
be  secured  at  a  lower  price?  There  is  no  reason,  what- 
ever, as  has  been  proven  by  past  experience,  why  with 
a  modification  of  the  Federal  control  which  has  existed 
in  the  past,  the  public  cannot  secure  the  unquestioned 
benefits 'of  private  initiative  and  of  efficiency  equally 
as  great  as,  or  greater  than,  that  shown  by  the  Federal 
Railroad  Administration. 


70  Reconstructing  America 

The  latter  has  made  more  intensive  use  of  all  of  the 
methods  the  railroads  originated  in s  the  way  of  secur- 
ing greater  carloading  and  greater  trainloading,  rendered 
possible  by  the  exercise  of  powers  which  had  always 
been  denied  to  private  control.  As  I  have  already  said, 
these  benefits,  if  the  public  desires  them,  can  be  pro- 
vided under  private  control  with  such  governmental 
regulation  as  will  make  the  results  possible. 

STAGNATION   WOULD   FOLLOW 

Much  has  been  accomplished  by  the  Federal  Adminis- 
tration in  suppressing  competition  and  using  facilities 
in  common  where  it  was  for  the  public's  good.  Rail- 
road officers  generally  believe  that  the  absolute  sup- 
pression of  competition  contemplated  by  the  regional 
plan,  as  well  as  by  Government  ownership,  would 
result  in  stagnation,  and  that  there  would  be  no  stimulus 
for  the  roads  under  such  a  plan  to  strive  continually  to 
better  their  service  ;  whereas  under  competition  regulated 
by  Government,  all  of  the  benefits  arising  from  the  desire 
of  private  owners  to  increase  the  traffic  and  earnings  of 
their  roads  would  follow. 

A   NATIONAL   POLICY   WANTED 

Before  the  Senate  Interstate  Commerce  Committee 
in  January  Mr.  Kruttschnitt  said  in  part : 

We  are  asking  you  to  do  what  has  never  been  done 
before,  that  is,  to  adopt  a  national  railroad  policy.  If 
you  do  that  the  policy  cannot  change  every  four  years. 
Recent  occurrences  have  shown  that  the  Interstate 
Commerce  Commission  has  no  'hesitation  in  overruling 
the  acts  of  an  official  who  has  much  greater  power  than 


Expert  Opinion  on  the  Railroad  Question    71 

the  proposed  Secretary  of  Transportation.  We  are 
chiefly  concerned  with  the  establishment  of  a  definite 
policy  by  Congress.  Whether  it  is  given  effect  through 
a  Cabinet  officer  or  through  an  enlarged  and  fortified 
commission  is  still  a  matter  of  discussion.  Add  to  that 
a  board  for  the  adjustment  of  wages,  which  should  be 
closely  tied  to  the  body  which  controls  rates  and  rev- 
enues. We  are  not,  however,  held  to  a  hard  and  fast 
plan. 

CHAIRMAN  CUYLER'S  PLAN 

The  plan,  as  submitted  by  Chairman  Cuyler,  has 
been  adopted  by  the  Association  of  Railway  Executives, 
representing  about  92  per  cent  of  the  earnings  of  the 
country.  In  it,  we  ask  Congress  to  make  it  possible 
for  the  carriers  to  give  the  public  the  advantages  of 
conservation  of  capital  by  requiring  unification  of  lines 
and  terminals,  when  required  in  the  public  interest,  by 
promoting  useful  consolidations  and  permitting  agree- 
ments as  to  rates  and  practices,  the  benefits  of  which 
have  been  proved  during  Federal  operation,  but  which 
the  carriers  by  law  have  been  prevented  from  supplying. 

Its  fundamental  features,  to  which  details  of  organi- 
zation and  operating  machinery  are  subordinate,  are : 

First  —  The  creation  of  a  Department  of  Transporta- 
tion headed  by  a  Secretary,  who  would  sit  at  the  Presi- 
dent's council  table,  who  would  relieve  the  Interstate 
Commerce  Commission  of  its  executive  duties,  and  in 
whose  jurisdiction  would  be  centered  rate  regulation 
subject  to  revision  by  the  Interstate  Commerce  Com- 
mission, and  the  fixing  of  wages,  and  who  would  use  the 
power  of  the  Administration  to  maintain  proper  service, 
to  create  the  necessary  credit  for  the  carriers,  and  to 


72  Reconstructing  America 

maintain  harmonious  relations  between  employers  and 
employees. 

Second  —  The  adoption  of  a  fixed  policy  as  to  the 
revenues  of  the  carriers  by  requiring  that  the  influence 
of  the  President,  through  his  Secretary  of  Transportation, 
shall  be  put  behind  movements  for  increased  rates  which 
he  finds  proper,  and  the  establishment  of  a  statutory 
rule  for  rate  making,  which  shall  require  that  rates 
be  not  only  reasonable  but  adequate  and  sufficient  to 
protect  existing  investment  and  to  attract  capital 
necessary  to  maintain  existing  properties  up  to  the 
standard  of  the  public  need,  and  for  the  construction 
of  extensions  and  branches. 

Third  —  To  provide  for  compulsory  Federal  incorpo- 
ration and  for  the  elimination  of  the  conflict  of  regulating 
power  between  the  States  and  the  Federal  Government 
as  to  all  essential  matters,  including  rates,  State  and 
interstate,  with  as  little  interference  as  possible  with  the 
State  commissions  in  carrying  out  the  intended  purposes. 

A   SUGGESTION   MERELY 

Our  plan  is  not  presented  in  the  shape  of  a  hard  and 
fast  bill,  but  is  offered  as  a  suggestion,  by  no  means  in- 
flexible, of  a  way  to  attain  desired  ends. 

The  question  of  a  guarantee  was  freely  discussed  in 
our  deliberations,  but  we  do  not  ask  for  a  guarantee. 
We  recognize  that  the  establishment  of  a  definite  guar- 
antee would  stifle  all  incentive  to  efficient  management 
and  would  destroy  competition  as  to  service  and  facili- 
ties, for  if  necessary  revenue  could  be  obtained  without 
effort,  what  inducement  would  exist  to  make  an  effort? 

Under  our  plan,  if  a  rate  system  be  put  in  effect  in 


Expert  Opinion  on  the  Railroad  Question    73 

a  given  region  that  will  produce  revenue  adequate  to 
yield  a  fair  return  on  roads  operated  under  average 
conditions  and  with  reasonable  efficiency,  and  to  enable 
them  to  maintain  their  credit  and  pay  satisfactory  returns 
to  their  security  holders,  some  roads  below  the  average 
which  should  never  have  been  built,  or  which  were  poorly 
located  and  are  indifferently  managed,  may  be  forced 
to  reorganize  or  sell  their  properties,  while  those  above 
the  average  will  prosper.  But  all  without  exception 
will  be  stimulated  by  self-interest  to  create  new  and 
increase  existing  traffic  by  competition  in  service  and 
facilities,  because  by  so  doing  the  returns  to  the  owners 
are  increased  and  at  the  same  time  the  public  is  better 
served. 

VI 

PRIVATE  OWNERSHIP  MOST  ECONOMICAL 

BY  THEODORE  PERRY  SHONTS 

Mr.  Theodore  P.  Shonts,  President  of  the  Inter- 
borough  Rapid  Transit  Co.,  of  New  York,  offers  the 
following  principles  as  a  solution  of  the  railroad  problem  : 

A  plan  of  government  regulation  which  will  be 
scientific  and  not  political,  which  will  apply  the 
same  point  of  view  to  approving  rates  as  to  approv- 
ing the  chemical  composition  of  a  steel  rail. 

Concentration  in  the  regulating  authority  which 
adds  to  the  expenses  of  the  roads  of  responsibility 
for  the  rates  with  which  those  expenses  must  be  met. 

Provision  that  initiation  of  rates  shall  be  in  the 
hands  of  the  carriers ;  that  rates  may  not  be  sus- 


74  Reconstructing  America 

pended,  except  upon  complaint  and  after  a  hear- 
ing, and  that  final  decision  must  be  made  within 
sixty  days. 

Establishment  by  Congress  itself  of  the  funda- 
mental principles  to  govern  the  reasonableness  of 
rates,  such  principles  to  include  fair  reward  for 
excellence  of  service,  efficiency  of  management,  and 
prudent  foresight  in  providing  new  facilities  against 
future  needs. 

If  these  were  embodied  in  law  I  believe  the  public 
would  gain  immense  advantage  by  the  promptest 
possible  return  of  the  properties  to  their  owners. 

As  one  with  practical  railroad  experience  and  as 
an  observer  of  government  operation  throughout  the 
world,  I  am  convinced  that  the  most  economical  oper- 
ation can  be  attained  under  private  ownership.  And 
the  gains  we  have  obtained  from  government  operation 
can  all  be  retained  under  private  ownership. 

The  great  fact  about  government  operation  is  the 
inevitable  tendency  toward  extravagance  and  inefficiency. 
If  the  deficit  from  operations  can  always  be  made  up 
out  of  taxation,  if  there  is  to  be  no  reward  for  economy 
and  forethought  it  is  impossible  to  expect  careful  watch- 
fulness over  expenditures.  .  .  . 

CAPITAL   MUST  HAVE   AN   INCENTIVE 

The  cardinal  thought  is  this :  That  if  we  are  to  es- 
cape not  only  the  bureaucracy,  extravagance,  and  dead 
level  of  government  ownership  and  operation,  but  also 
the  political  risk  involved  in  the  creation  of  a  new  and 
gigantic  class  of  government  employees,  we  must  be 


Expert  Opinion  on  the  Railroad  Question    75 

willing  that  some  men  who  exercise  energy,  daring 
and  prudence  shall  receive  some  fair  measure  of  reward 
for  their  effort.  In  other  words,  we  must  recognize 
that  it  is  no  crime  to  make  money  in  railroad  build- 
ing, if  the  money  is  made  honestly  and  fairly. 

If  this  principle  is  not  to  be  recognized,  the  money  for 
future  railroad  development  simply  cannot  be  obtained 
under  private  ownership.  To  return  the  properties 
to  their  present  owners  without  recognition  of  that 
principle  simply  means  that  the  tendencies  of  a  year 
ago  will  be  revived  —  and  inevitable  bankruptcy  or 
government  ownership  will  again  stare  the  railroads 
in  the  face. 

There  is  no  use  in  blinking  our  eyes  to  the  stern  facts. 
If  the  railroads  are  not  permitted  to  earn  sufficient 
money  to  attract  new  capital,  and  if  the  risks  of  the 
business  are  not  to  be  met  with  adequate  reward  to 
those  who  take  them,  there  is  no  use  of  again  making 
the  experiment  of  private  ownership.  It  will  be  doomed 
to  failure. 

THE   GREAT  DANGER 

The  great  danger  to  the  public  interest  in  the  present 
immediate  situation  is  that  the  owners  of  existing  rail- 
road securities  (that  is,  those  having  most  at  stake), 
and  the  agitators  and  theorists  (that  is,  those  having 
least  at  stake),  may  come  to  such  agreement  in  opinion 
that  they  would  jointly  become  militant  in  favoring  a 
continuance  of  the  present  plan  of  government  control. 
That  would  mean  that  the  great  interests  of  the  public 
at  large  would  suffer  through  lack  of  appreciation  and 
understanding. 


76  Reconstructing  America 

We  must  frankly  recognize  that  here  is  a  case,  not 
for  courts,  for  commissions,  or,  indeed,  for  government. 
The  people  will  and  should  decide  this  issue,  and  the 
greatest  service  railroad  men  can  perform  is  to  see  to 
it  that  the  American  people  understand  clearly  the 
momentous  issues  involved.  If  the  case  is  put  clearly 
before  the  people,  I,  for  one,  have  perfect  confidence 
that  their  decision  will  be  the  same  as  that  of  every 
railroad  executive  who  is  seeking  to  preserve  and  pro- 
mote the  welfare  and  prosperity  of  our  common  country. 


VII 

A  FEDERAL  TRUNK-LINE  SYSTEM 

BY  Hox.  WILLIAM   JENNINGS   BRYAN 

William  Jennings  Bryan  advocates  a  dual  plan  by 
which  the  Government  will  own  and  operate,  not  the 
entire  railroad  system  of  the  country,  but  only  a  trunk- 
line  system  sufficient  to  give  every  State  receiving  and 
shipping  facilities.  He  believes 

Such  a  system  would  effectively  regulate  interstate 
commerce,  and  yet  would  cost  but  a  small  sum  com- 
pared with  the  nationalization  of  all  railroads. 

Such  a  system  would  also  meet  the  objections  made 
to  the  establishment  of  a  gigantic  bureau  of  Washing- 
ton, and  the  objections  based  upon  the  fear  of  centraliza- 
tion —  a  real  fear  —  in  support  of  which  many  illus- 
trations can  be  drawn  from  history.  The  Govern- 
ment can  easily  enter  upon  this  partial  nationalization 
by  the  appointment  of  a  committee  to  investigate  the 
advisability  and  cost  of  such  a  system,  and  the  report 


Expert  Opinion  on  the  Railroad  Question    77 

can  be  made  after  investigation  and  acted  upon  before 
the  time  set  for  the  return  of  the  railroads  to  private 
ownership. 

The  dual  plan  contemplates,  not  only  a  trunk-line 
system  owned  and  operated  by  the  Federal  Government, 
but  the  ownership  and  operation  of  the  local  network 
of  roads  by  the  several  States. 

The  Government  could,  for  instance,  take  over  one 
first-class  trunk  line  between  the  Atlantic  seaboard  and 
the  Great  Lakes  at  Chicago ;  another  to  the  Mississippi 
Valley  at  St.  Louis;  another  to  the  Middle  West,  and 
lines  to  the  North,  South  and  Central  Pacific  coast ; 
also  north  and  south  lines,  and  so  on. 

This  nationalized  system  engaged  in  interstate  com- 
merce would  traverse  all  the  States. 

It  would  compete  with  privately  or  State-owned  rail- 
roads in  service  and  in  economy  of  operation,  not  in 
rates,  because  the  Government  would  fix  all  interstate 
rates,  as  it  does  at  present. 

A   TEST    OPPORTUNITY 

This  would  give  an  opportunity  to  test  the  relative 
merits  of  private  vs.  public  ownership.  The  Govern- 
ment owned  system  would  have  lower  fixed  charges 
because  its  bonds  would  be  issued  at  lower  interest 
rates.  The  resulting  profits  could  be  used  either  to 
extend  the  system  or  pay  off  the  debt.  The  taking  over 
of  a  trunk  line  would  not  embarrass  the  owners  of 
branch  lines  (whether  owned  by  a  corporation  or  a 
State),  because  the  trunk  line  would  be  open  to  all  on 
fair  and  impartial  terms. 

In  other  words,  while  it  is  Government  ownership, 


78  Reconstructing  America 

the  larger  part  of  the  problem  is  distributed  among  forty- 
eight  States  and  can  be  extended  over  a  number  of 
years. 

If  the  dual  plan  is  adopted  the  Government  can,  in  a 
short  time,  put  into  operation  a  trunk-line  system  which 
will  make  each  State  independent  in  regard  to  the 
railroads  within  its  borders,  because  whether  these 
railroad  lines  be  long  or  short  they  can  find  an  out- 
let over  the  national  system,  and  the  States  can  put 
the  system  of  Government  ownership  into  operation 
as  rapidly  as  public  sentiment  is  ready,  exercising  in  the 
meantime  a  complete  control  over  intrastate  traffic. 

VIII 

RECEIVERSHIPS    FOR    MANY    ROADS    IF    GOVERNMENT 
RELINQUISHES  CONTROL 

BY  N.   L.   AMSTER 

Mr.  N.  L.  Amster,  chairman  of  the  Executive  Com- 
mittee of  the  Chicago,  Rock  Island  &  Pacific  Railroad, 
says : 

I  am  unalterably  opposed  to  the  Government  relin- 
quishing control  of  the  railroads  at  this  time.  It  would 
be  fatal  to  the  interests  of  railroad  security  holders 
because : 

(1)  The  money  situation  at  present  is  such  as  to  make 
it  impossible  for  even   roads  of  first  rank   to  finance 
themselves  at  any  reasonable  rate  of  interest,  and  second- 
grade  roads  would  be  unable  to  finance  themselves  at  all. 

(2)  The  Railroad  Administration  has  put  into  effect 
an  advance  in  wages  amounting  to  about  $800,000,000  a 


Expert  Opinion  on  the  Railroad  Question    79 

year.  When  this  advance  was  made  the  country  was  on  a 
war  basis,  and  railroad  traffic,  in  common  with  general 
business,  was  at  its  high  point.  Since  the  signing  of  the 
armistice,  however,  general  business  has  slackened,  and 
this  will  soon  be  reflected  in  reduced  railroad  revenues. 

(3)  The  Federal  Administration  instituted  an  increase 
of  40  per  cent  in  passenger  rates  and  25  per  cent  in 
freight  rates  to  offset  this  increase  in  wages.  Some  of 
the  State  Commissioners  and  shippers  in  Washington 
hold  the  view  that  now  the  war  is  over,  freight  and 
passenger  rates  should  be  reduced  ;  while  representatives 
of  the  brotherhoods  and  other  railroad  employees  are 
determined  wages  shall  not  be  decreased. 

Although  the  value  of  unified  operation  of  railroads 
has  not  been  fully  tested  because  of  war  conditions,  it  is 
interesting  to  point  out  that  through  the  common  use 
of  terminal  facilities  and  equipment  there  are  to-day 
in  the  East  100,000  empty,  idle  coal  cars,  whereas  a 
year  ago,  or  before  Government  control,  with  practically 
the  same  number  of  coal  cars  in  the  country,  there  were 
not  enough  to  go  around.  .  .  . 

In  my  opinion  if  the  Government  were  to  relinquish 
all  control  of  the  railroads  in  the  immediate  future  it 
would  be  necessary  to  simultaneously  appoint  receivers 
for  a  great  many. 

IX 

GOVERNMENT  OPERATION  DISTASTEFUL  TO  SHIPPERS 

BY  CLIFFORD   T1IORXE 

That  there  is  something  rotten  in  the  raihvay  Den- 
mark is  the  belief  of  Clifford  Thorne,  who,  on  behalf 


80  Reconstructing  America 

of  livestock,  grain,  and  petroleum  shippers,  disclosed 
on  January  24  last  to  the  Senate  Interstate  Commerce 
Committee  the  extent  to  which  the  Federal  Railroad 
Administration  had  arbitrarily  brushed  aside  statutory 
and  common  law  provisions  concerning  damage  claims 
against  railroads.  Mr.  Thome  read  the  following 
statement : 

McADOO  AND  THE  SHIPPERS 

Government  operation  is  so  distasteful  among  the 
shippers  of  the  United  States  that  were  a  popular  vote 
taken  to-day  it  would  be  defeated  overwhelmingly. 

If  the  members  of  Mr.  McAdoo's  staff  had  deliber- 
ately planned  to  "double  cross"  the  director  general,  and 
thereby  to  make  government  operation  so  unpopular 
that  it  would  tend  to  kill  any  possible  movement  toward 
government  ownership,  they  could  not  have  adopted 
any  more  effective  methods  than  those  which  actually 
have  been  adopted.  .  .  . 

In  the  midst  of  the  intensely  interesting  and  instruc- 
tive discussion  which  you  have  listened  to  during  pre- 
vious days,  about  the  forty  or  more  reforms  that  have 
been  proposed  by  the  Interstate  Commerce  Commission 
and  by  the  railway  companies,  I  desire  to  challenge 
your  attention,  if  possible,  to  a  single  proposition.  It  is 
of  paramount  importance  to  the  stability  and  progress 
of  American  industry  that  you  shall  immediately  restore 
the  full  powers  of  our  courts  and  commissions  over  the 
railroads  of  the  United  States. 

This  can  be  accomplished  in  a  very  simple  manner 
by  striking  out  a  few  lines  and  inserting  one  or  two  sen- 
tences in  Section  10  of  the  railroad  control  law. 


Expert  Opinion  on  the  Railroad  Question    81 

And  unless  this  is  done  the  shippers  of  the  country 
will  suffer  incalculable  injury.  We  may  differ  on  many 
things,  such  as  the  relative  functions  of  the  State  and 
Federal  governments,  the  pooling  of  earnings,  mergers, 
and  consolidations  which  may  tend  to  eliminate  compe- 
tition in  service,  the  control  of  capitalization  by  the 
Federal  government,  or  by  the  State ;  but  I  believe 
that  I  am  safe  in  saying  that  the  vast  majority  of  the 
shippers  of  the  United  States  are  united  in  urgently 
petitioning  for  immediate  action  on  the  proposition 
which  I  have  stated. 

We  believe  that  all  other  discussion  might  well  be 
temporarily  suspended  for  a  few  days  so  as  to  make 
possible  the  immediate  consideration  of  this  issue.  .  .  . 

ASKS   ADVICE   BE   TAKEN 

It  is  essential  that  this  amendment  which  we  have 
suggested  shall  be  in  effect  during  this  interval  while 
you  are  considering  the  ultimate  disposition  of  the 
railroads ;  for  otherwise  during  the  next  few  months 
many  sweeping,  wholesale  changes  in  rates,  rules,  and 
regulations  now  pending  will  be  consummated ;  and 
these  changes  have  no  connection  whatsoever  with  the 
war  against  the  Kaiser. 

In  the  light  of  past  experience,  we  earnestly  beg  of 
you  to  accept  the  word  of  no  man  as  to  the  manner  or 
the  extent  that  these  powers  will  be  exercised  in  the 
future.  When  this  law  was  before  you  Congress  was 
told  that  the  power  to  control  rates  during  the  time  of 
Federal  possession  ought  not  to  be  exercised  and  would 
not  be  exercised  except  in  such  cases  as  might  be  neces- 
sary ''in  the  public  interest."  You  were  told  that,  ''It 


Reconstructing  America 


would  be  very  unwise  for  the  Federal  government  to 
undertake  through  the  Director-General  of  Railroads 
-who  merely  represents  the  President  in  this  control 
-  to  pass  upon  all  the  rates  in  the  country,  either  de 
novo,  or  as  questions  may  arise  concerning  them."  And 
yet  the  fact  remains  that  one  of  the  first  acts  of  the 
Director-General  was  to  pass  upon  all  the  rates  in  the 
country,  and  at  the  present  time  the  Director-General 
is  passing  upon  rates  from  one  end  of  the  nation  to  the 
other,  and  making  orders  that  will  not  affect  to  the 
slightest  degree  the  successful  prosecution  of  the  war 
against  autocracy  in  Europe. 

I    The  temptation  was  too  great  for  a  stall  composed 
almost  wholly  of  railroad  men. 

The  Director-General  of  Railroads  has  exercised,  and 
is  now  proposing  to  exercise,  arbitrary,  despotic  powers 
in  defiance  of  the  common  law  and  the  statutory  law 
of  the  country. 

The  Director- General  has  decided,  and  is  now  pro- 
posing to  decide,  controverted  issues  between  the  ship- 
pers and  the  railroads  involving  millions  of  dollars, 
without  any  semblance  of  a  hearing  before  a  disinter- 
ested body. 

UPSETTING   OLD   METHODS 

The  Director- General  is  now  considering  wholesale 
disturbances  of  rate  relationships  upon  which  business 
has  been  built  up  and  established  during  the  past  genera- 
tion, without  any  hearing  before  a  disinterested  tri- 
bunal before  the  new  rates  become  effective. 

All  this  has  created  uncertainty  and  confusion  among 
the  shippers  of  the  country,  which  is  intolerable. 


Expert  Opinion  on  the  Railroad  Question    83 

We  most  earnestly  petition  the  present  Congress 
to  amend  Section  10  of  the  railroad  control  law  as  fol- 
lows : 

First,  restore  the  suspension  powers  of  the  Inter- 
state Commerce  Commission,  which  will  insure  us  a 
decision  by  a  disinterested  tribunal  before  any  more 
sweeping  revisions  shall  become  effective ;  second, 
strike  out  the  clause  which  attempts  to  make  the  orders 
of  the  President  superior  to  State  and  Federal  law  and 
the  common  law;  and,  third,  insert  a  clause  requiring 
the  Director-General  to  pay  final  judgments  against 
common  carriers  under  his  control,  and  charge  the  same 
to  operating  expenses,  where  so  chargeable  prior  to 
government  operation. 

The  present  law,  which  attempts  to  authorize  the 
former  chairman  of  the  board  of  directors  of  the  Atchi- 
son,  Topeka  &  Sante  Fe  Railway  Company,  speaking 
for  the  President,  to  repeal  statutes  which  have  been 
solemnly  enacted  by  Congress  and  by  the  several  States, 
and  to  reverse  the  decisions  of  courts  of  last  resort,  is  an 
abortion.  This  is  supposed  to  be  a  republic,  and  not  a 
monarchy. 


CHAPTER  V 
PUBLIC  CONTROL  OF  WIRE  COMMUNICATIONS 

PROTESTS  from  more  than  a  dozen  State  Public  Service 
Commissions  against  the  Administration  measure  ex- 
tending Government  wire  control  were  presented  to  the 
House  Post  Office  Committee.  "Better  and  cheaper 
service  will  result  from  private  management  under 
efficient  State  commissions  than  under  the  present  con- 
trol," declared  Charles  E.  Elmquist  representing  the 
National  Association  of  Railway  and  Utilities  Com- 
missions, in  offering  the  protests. 

The  attempt  of  Postmaster- General  Burleson  to  put 
in  effect  new  telegraph  tariffs  was  regarded  as  an  inter- 
ference with  State  rights,  and  a  number  of  States, 
New  York,  Massachusetts,  New  Jersey,  and  Michigan, 
among  others,  instituted  legal  proceedings.  Governor 
Coolidge  of  Massachusetts  saw  no  reason,  "why  any 
of  the  States  should  surrender  any  of  their  rate-making 
powers  to  the  Federal  Government.  In  times  of  war 
emergencies  may  arise  making  it  advisable  not  to  stand 
upon  the  Constitution,  but  at  the  present  time  I  feel 
that  the  State's  interest  should  be  fully  protected.  I  feel 
strongly  that  the  Public  Service  Commission,  as  in  the 
past,  should  continue  to  make  rates  for  Massachusetts 
patrons." 

The  Administration's  position  as  to  Government 
ownership  of  telegraphs  is  set  forth  in  the  following  article 

84 


Public  Control  of  Wire  Communications  85 

by  the  Postmaster-General.  Following  him  Clarence 
H.  Mackay,  president  of  the  Postal  Telegraph-Cable 
Company,  one  of  the  seized  lines,  gives  his  reasons  why 
private  ownership  of  wire  companies  should  be  continued. 

Since  these  articles  were  written  the  House  Committee 
on  Post  Offices  and  Post  Roads  decided  by  a  vote  of 
10  to  8  against  Government  purchase  of  the  telegraph 
and  telephone  lines,  and  on  December  31  next  they  will 
revert  to  private  ownership.  This  constitutes  a  victory 
for  the  States,  who  will  continue  to  fix  rates  and  exercise 
other  police  regulations. 

The  question,  however,  is  still  a  live  one  before  the 
American  people,  and  will  recur  in  political  controver- 
sies, indefinitely.  The  reach  of  administrative  power, 
toward  business  not  of  a  government  character,  is  a 
subject  of  continual  agitation,  in  the  present  administra- 
tion, in  Congress,  and  in  the  press.  The  two  positions 
presented  herewith  reflect  authoritative  points  of  view. 

I 
WHY  THE  GOVERNMENT  SHOULD  KEEP  THE  WIRES 

BY  HON.  ALBERT   SIDNEY   BURLESON 

Postmaster-General 

When  I  urge  the  permanent  merging  of  the  telegraph 
and  telephone  facilities  of  the  country  with  the  Postal 
System,  all  to  be  owned  and  operated  by  the  Govern- 
ment, I  advocate  nothing  that  is  novel,  startling,  radical 
or  revolutionary.  If  it  is  "socialism,"  then  most  of 
my  predecessors  in  the  office  of  Postmaster- General 
during  the  past  fifty  years  must  be  classed  as  socialists, 
also  many  of  our  foremost  statesmen  and  economists, 
including  a  number  noted  for  their  conservative  opin- 
ions as  to  governmental  operations. 


86  Reconstructing  America 

I  do  not  urge  the  change  because  of  the  Government 
having  taken  over  those  facilities  temporarily ;  indeed, 
I  advocated  it  long  before  the  beginning  of  the  war  which 
caused  the  temporary  change. 

The  question  of  the  Government's  owning  and  operat- 
ing the  wires  is  not,  properly  speaking,  one  of  "  Govern- 
ment ownership"  in  the  sense  generally  given  that  term  ; 
it  bears  little  if  any  relation  to  any  such  question  of  the 
Government's  " going  into  business"  as  would  be  in- 
volved in  the  Government's  undertaking  a  permanent 
monopoly  of  a  process  of  general  production.  The 
change  would  harmonize  perfectly  in  principle  and  fact 
with  Abraham  Lincoln's  apt  definition  of  proper  gov- 
ernmental operations,  to  wit:  "The  legitimate  object 
of  government  is  to  do  for  the  people  what  needs  to 
be  done,  but  which  they  cannot  by  individual  effort 
do  at  all,  or  do  as  well,  for  themselves." 

Furthermore,  it  would  be  properly  in  line  with,  and 
in  fact  furnish  the  quickest  and  safest,  if  not  the  only 
feasible,  means  for,  the  bringing  about  of  that  coor- 
dinate elaboration  of  our  various  systems  of  electrical 
communication  which  our  best  practical  experts  hold 
to  be  the  ultimate  ideal  of  service. 

The  suggestion  is  by  no  means  new,  for  it  was  put  forth 
authoritatively  at  the  very  beginning  of  wire  communica- 
tion. As  is  well  known,  the  Federal  Government,  by 
subsidy,  assisted  in  the  original  development  of  the 
telegraph  and  pondered  very  seriously  making  it  a 
governmental  monopoly  from  the  start.  While  it  must 
be  admitted  that  the  development  of  our  utilities  for 
electrical  communication,  like  that  of  most  other  facili- 
ties based  on  mechanical  invention,  may  be  credited 


Public  Control  of  Wire  Communications  87 

largely  to  private  initiative,  individual  enterprise  does 
not  account  for  it  all.  The  Government  as  well  as  the 
public  generally  made  valuable  contributions  to  that  de- 
velopment. 

NOT   PARTISAN,   REVOLUTIONARY,    OR   UNCONSTITUTIONAL 

The  fact  that  nearly  every  other  progressive  country 
treats  the  telephone  and  telegraph  as  a  governmental 
monopoly  and  operates  them  as  parts  of  their  postal 
systems  banishes  the  suggestion  that  in  doing  likewise 
we  should  do  anything  partaking  of  the  startling, 
radical,  or  revolutionary. 

Since,  in  this  country,  the  change  has  been  advocated 
with  equal  ardor  by  distinguished  leaders  in  all  parties, 
and  by  Postmaster-Generals  in  both  Republican  and 
Democratic  administrations,  the  question  cannot  be 
classed  with  those  properly  rated  as  partisan. 

Although  the  Constitution  does  not  prescribe  the 
means  of  conveying  intelligence  by  wire  as  a  govern- 
mental monopoly,  as  it  does  the  means  for  carrying  the 
mails,  we  may  suspect  that  the  omission  is  due  to  the 
fact  that  there  were  no  telephones  or  telegraphs,  and 
none  anticipated,  when  the  Constitution  was  adopted. 

The  Constitution  does  not  withhold  the  Postal  Service 
from  private  control  as  a  "business"  or  as  an  enterprise 
from  which  the  Government  expected  to  earn  profits, 
but  because  it  then  constituted  the  only  general  and 
universal  means  for  conveying  intelligence.  Practically 
the  only  other  interrelated  means  of  communication 
were  the  public  highways  which  from  time  immemorial 
have  been  owned  and  controlled  by  government. 

The  operation  of  the  Postal  Service  was  reserved  ex- 


88  Reconstructing  America 

clusively  to  the  Government  because  it  was  essential  to 
the  progress  and  development  of  the  country  that  the 
mails  be  handled,  not  with  an  eye  first  to  the  earning  of 
revenue,  but  to  guarantee  and  facilitate  the  transmission 
of  intelligence  from  one  citizen  to  the  other.  And  all 
will  admit  that  this  could  not  be  done  at  all  or  as  well 
through  individual  effort. 

At  that  time,  as  stated,  practically  the  only  means  of 
general  communication  was  that  afforded  by  the  posts. 
The  mails  had  no  competitor.  The  telegraph  and 
telephone,  which  were  invented  long  after  the  Constitu- 
tion was  adopted,  are,  by  the  nature  of  the  business 
done,  competitors  of  the  posts.  The  fact  of  a  message 
being  transmitted  by  wire  instead  of  via  a  mail  box  does 
not  change  its  basic  character  as  a  communication  of 
intelligence,  the  handling  of  which  the  Government 
desired  to  keep  exclusively  in  its  own  hands. 

A   PART   OF   THE   NATIONAL   DEFENSE 

The  Constitution  in  giving  Congress  control  of  the 
post  offices  and  post  roads  obviously  to  my  mind  con- 
templated no  particular  physical  structures  but  the 
general  communication  of  intelligence.  It  is  entirely 
probable,  had  the  telegraph  and  telephone  been  estab- 
lished or  so  much  as  anticipated,  that  they  would  also 
have  been  expressly  included. 

It  is  now  an  accepted  axiom  of  government  that  the 
mails  constitute  a  means  for  conveying  intelligence  which 
it  is  as  much  the  duty  of  the  government  to  establish 
and  maintain  as  it  is  its  duty  to  provide  for  the  national 
defense.  In  fact,  an  established  and  widely  extended 
system  of  communication  is  a  part  of  the  national  de- 


Public  Control  of  Wire  Communications  89 

fense.  Moreover,  it  is  essential  to  the  development  of 
the  country  and  the  prosperity  and  general  enlighten- 
ment of  its  people.  It  is  a  utility  of  defense  and  of 
progress  as  much  during  peace  as  during  war  times. 

No  one  would  withhold  the  liberal  meed  of  credit  due 
those  who  by  private  initiative  and  enterprise  directed 
the  development  of  our  truly  great  system  of  electrical 
communication.  However,  that  development  would  not 
have  been  possible  but  for  the  existence  of  a  public 
willing  to  and  capable  of  giving  it  support.  Hence  it 
might  be  suggested  that  the  fertility  of  the  soil  witji 
which  they  worked  was  in  some  degree  made  possible 
by  the  unparalleled  encouragement  which  before  and 
concurrently  was  given  by  our  government  to  the  trans- 
mission of  intelligence  through  the  mails. 

It  is  true  that  this  development  is  made  possible  by 
inventions  deserving  individual  reward  and  conveying 
individual  rights ;  but  it  is  proper  to  add  that  such  in- 
ventions are  encouraged  and  protected  by  our  patent 
laws. 

Because  our  present  systems  of  electrical  communi- 
cation were  developed  largely  through  private  initia- 
tive and  enterprise  makes  no  valid  argument  in  favor 
of  their  continuance  under  private  control  and  owner- 
ship. How  they  would  have  developed  under  Govern- 
ment ownership  no  one  can  with  definiteness  say. 
However,  its  contrast  with  the  development  of  our 
marvelous  system  of  mails,  no  one  will  contend  is  dis- 
creditable to  the  latter.  Moreover,  if  we  go  back  to 
origination,  it  is  fair  to  note  that  the  handling  of  the 
mails  has  not  always  been  an  exclusively  government 
function  and  that  our  own  Postal  System  was  taken  over 


90  Reconstructing  America 

in  part  at  least  from  so-called  private  enterprise.  And, 
the  so  often  expressed  opposite  view  to  the  contrary 
notwithstanding,  private  enterprise  and  personal  initia- 
tive may  yet  and  do  contribute  to  the  efficiency  of  the 
Postal  Service. 

WIRE   UTILITIES   "NATURAL  MONOPOLIES" 

The  wire  service  like  the  mails  is  a  public  utility  of 
universal  necessity  and  is  adapted  to  the  performance  of 
no  other  function  than  that  of  conveying  intelligence ; 
and  disregarding  the  divergence  of  views  as  to  Govern- 
ment ownership  of  public  utilities  generally  it  must  be 
recognized  that  electrical  agencies  of  communication 
stand  alone  as  an  essential  utility  performing  a  Govern- 
ment function.  It  is  possible  to  transmit  a  written  com- 
munication independently  of  the  mails  and  sometimes 
quite  as  expeditiously.  Surrounding  the  mails  are  no 
such  natural  barriers  like  those  which  render  wire  facili- 
ties, and,  to  a  large  extent,  other  means  for  electrical 
communication,  supreme  and  exclusive  in  their  field. 
They,  to  a  much  greater  (albeit,  to  an  almost  complete) 
extent  than  the  mails  are  "natural  monopolies." 

The  progress,  prosperity,  and  enlightenment  of  the 
nation  are  dependent  upon  expansive  means  of  com- 
munication between  and  among  the  people.  Neither  the 
telephone  nor  telegraph  is  any  longer  a  means  of  com- 
munication solely  for  class  or  particularized  use.  Either 
bears  more  potently  on  the  daily  lives,  habits,  comfort, 
and  activities  of  the  people  than  did  the  mails  a  hundred 
years  ago.  Under  the  complex  system  of  society  which, 
to  a  great  extent,  quick  means  for  conveying  intelligence 
is  responsible  for,  we  could  now  dispense  with  either 


Public  Control  of  Wire  Communications  91 

telephone  or  telegraph  at  perhaps  less  inconvenience 
than  would  have  accompanied  the  abolition  of  organized 
mail  service  a  century  ago. 

Therefore,  the  very  nature  and  quality  of  those  utili- 
ties make  it  highly  important  for  the  extension  of  wire 
service  to  be  determined  by  public  needs  rather  than  the 
opportunity  for  private  gain.  The  wire  systems  are 
supported  by  the  public  because  they  are  a  necessity  in 
social  life  and  business  enterprise,  however  wasteful 
they  may  be  in  their  methods  of  operation  or  extrava- 
gant in  their  charges. 

<r  The  extension  of  mail  service,"quite  fortunately  for  the 
country,  has  never  depended  absolutely  on  profitable 
return  in  money.  No  matter  how  remote  a  community, 
or  how  difficult  the  reaching  of  it  by  post  may  be,  the 
Government  considers  it  a  duty  to  see  that  that  com- 
munity is  given  such  mail  service  as  all  the  equities, 
instead  of  the  question  alone  as  to  whether  it  shall  pay 
for  itself,  may  entitle  that  community  to. 

PRIVATE   OWNERSHIP   EXACTS   A   PROFIT 

But  the  very  nature  of  private  ownership  makes  it 
necessary  that  the  establishment  of  extension  of  wire 
service  be  determined  almost  wholly  by  whether  it  shall 
readily  pay  a  profit.  Under  private  ownership  the  ex- 
tension of  our  mail  service  as  made  in  the  one  branch 
of  rural  free  delivery  —  which  on  the  whole  has  not  been 
a  losing  venture  for  the  Government  and  of  value  to 
the  country  incalculable  in  terms  cf  money  —  would 
have  been  impracticable  and  impossible.  The  extent 
of  the  wire  service  under  private  ownership  is  restricted 
to  areas  where  it  may  be  operated  with  more  or  less 


92  Reconstructing  America 

immediate  and  continuing  profit  to  the  owners.  The 
competition  which  it  invites  is  that  which  is  in  pursuit 
of  profit,  not  in  rivalry  for  public  benefit  and  service. 

I  would  not  be  so  absurd  as  to  argue  that  the  Govern- 
ment should  give  the  people  a  free  wire  service  or  any- 
thing akin  to  it,  no  more  than  it  gives  to  them  a  free 
mail  service.  If  the  wires  cannot  .be  operated,  as  the 
mails  are,  with  more  benefit  to  the  public  for  the  full 
service  rendered  and  with  greater  safety  to  the  country 
than  under  private  ownership  they  should  not  be  taken 
over  permanently  by  the  Government. 

But  they  can  be  so  operated,  not  because  all  units 
of  operation  by  the  Government  would  of  necessity  be 
more  efficient  or  less  expensive  but  because,  among  other 
things,  amalgamations,  changes,  and  extensions  in  the 
body  of  the  service  which  can  be  undertaken  practi- 
cally by  the  Government  alone  would  render  the  whole 
more  efficient  and  at  less  cost  than  would  be  possible 
under  private  ownership. 

For  example,  private  capital  will  not  enter  such  enter- 
prises except  upon  the  prospect  of  good  return  on  the 
money  invested  with  an  added  margin  for  the  inevitable 
risks  of  loss  involved  in  all  private  undertakings.  Thus 
private  capital  is  investe'd  in  such  private  enterprises 
with  the  expectation  of  seven  or  eight  per  cent  and  often 
greater  return  on  the  investment,  while  the  Government 
can  borrow  money  at  four  and  one-half  per  cent  or  less. 
The  public  pays  the  charge  in  either  event.  But  the 
difference  between  four  and  one-half  per  cent  and  eight 
per  cent  for  the  money  invested  in  the  wire  systems  of 
the  United  States,  would,  as  careful  calculation  shows, 
maintain  and  pay  for  the  property  in  eighteen  years  and 


Public  Control  of  Wire  Communications   93 

nine  months.  The  Government  as  owner  would  be 
under  no  necessity  to  charge  interest  on  its  investment 
any  more  than  it  would  for  money  invested  in  postal 
facilities,  navy  yards,  or  other  public  property. 

THE   WASTES   OF   COMPETITION 

The  greatest  saving  would  come  through  the  elim- 
ination of  wastes  caused  by  the  competition  involved 
in  private  ownership,  which  competition,  under  private 
ownership,  is  necessary  to  the  protection  of  the  public's 
rights. 

Basically  it  would  be  as  logical  to  have  two  or  more 
post  offices  in  the  same  town  operating  independently 
and  where  patrons  of  each  had  no  means  of  communicat- 
ing with  each  other,  as  to  have  two  telephone  systems 
operate  in  the  same  territory,  for  in  either  case  the  cost 
to  the  public  is  multiplied  and  the  utility  divided. 

Mr.  Theodore  N.  Vail,  President  of  the  American 
Telephone  and  Telegraph  Company,  and  probably  the 
world's  highest  authority  on  wire  service,  declares  in  a 
recent  communication  —  in  which  he  quotes  extensively 
from  his  annual  report  for  1910  —  that  his  company 
should  afford  electrical  communication  ".  .  .of  every 
kind  of  intelligence  from  any  place  to  any  one  at  any 
other  place ;  that  the  service  should  be  comprehensive, 
nation  wide,  economical,  and  at  a  minimum  price  so  that 
potential  business  could  be  developed." 

But  to  do  that  effectively  and  economically,  he  goes 
on  to  say,  "requires  the  combination  of  every  kind  of 
electrical  transmission  of  intelligence  into  one  system 
over  which  the  most  efficient  service  could  be  rendered 
through  the  development  of  new  and  useful  service  and 


94  Reconstructing  America 

the  wire  plant  and  facilities  thus  to  be  utilized  to  the 
fullest  extent." 

He  advocates  "common  control  of  this  unified  sys- 
tem ...  to  the  furthermost  possible  limits,"  to  "cover 
our  nation  and  the  international  communications  to 
the  boundaries  of  all  other  nations  with  which  we 
have  existing  or  potential  relations."  He  thinks  there 
should  be  "one  control"  of  all  electrical  communications, 
domestic  or  international,  "open  wire,  cable,  or  radio," 
in  order  that  there  may  be  close  harmony  of  effort  and 
operation  one  with  the  other  in  all  connected  activities, 
including  research,  investigation  and  experimentation. 

"Only  in  this  way,"  he  says,  "can  the  greatest  results 
in  service,  in  public  benefit,  in  economy,  or  in  cheapness 
be  obtained." 

A   PRIVATE    COMBINE    OF   ALL   WIRES   IMPRACTICABLE 

I  doubt  if  it  would  be  practicable,  or  consistent  with 
the  country's  or  the  public's  interest,  for  such  a  combine 
to  come  into  being  under  private  ownership  and  control, 
however  patriotic  or  efficient  it  might  be.  In  truth, 
the  Government  alone  could  safely  exercise  such  a 
right  of  monopoly  as  the  wire  service  calls  for,  but 
some  plan  of  organization  should  be  devised  which  will 
combine  all  the  advantages  and  the  authority  possessed 
by  the  Government  without  losing  the  benefit  of  the 
experience  of  the  best  operation  which  our  industrial 
world  has  demonstrated  to  be  advantageous.  I  be- 
lieve such  a  plan  can  be  worked  out. 

While  the  various  branches  of  electrical  communica- 
tion are  inseparably  related  and  interdependent,  so  is 
all  wire  communication  related  to  and  ia  some  degree 


Public  Control  of  Wire  Communications  95 

dependent  on  postal  service.  The  mails,  as  is  well 
known,  are  often  used  in  facilitating  the  dispatch  of  wire 
messages,  and  no  doubt  the  mails  and  the  wires  could 
be  worked  together  extensively  with  mutual  advantage 
and  improvements.  In  countries  where  Government 
ownership  of  the  wires  prevails,  the  same  executive 
forces  serve  to  a  large  extent  for  both  the  wires  and 
the  mails ;  in  many  instances  the  same  buildings  and 
other  equipment  are  utilized  for  both  with  much  added 
convenience  and  saving  to  the  public. 

Information  acquired  through  Federal  control  of  the 
telegraph  and  telephone  systems  of  the  country  since 
last  August  enables  me  to  give  assurance  that  the  entire 
wire  system  of  the  country  can  be  acquired  and  paid  for 
in  twenty-five  years  out  of  the  savings  made  through 
the  elimination  of  duplications  in  plants  and  operating 
expenses  without  injury  —  in  fact  with  improvement  — 
to  the  service  rendered.  Therefore,  existing  means  of 
electrical  communication  of  intelligence  could  be  merged 
with  the  Postal  Service  without  any  ultimate  cost  to 
the  public,  and  at  the  same  time  develop  a  national  wire 
system  available  for  the  use  of  every  community  in 
the  country  coextensive  with  the  present  Postal  Service. 

Since  1845,  following  an  appropriation  by  Congress  in 
1844  looking  to  the  acquisition  of  the  Morse  invention 
by  the  Post-office  Department,  many  Postmaster- 
Generals  have  recommended  that  the  wire  service  be 
made  a  part  of  the  postal  monopoly. 

CONGRESS  HAS  OPTION  ON  TELEGRAPHS 

In  fact,  in  1866  Congress  by  proper  Act  and  the  ac- 
ceptance thereof  by  the  tjlen^ph  companies  caused  to 


96  Reconstructing  America 

be  obtained  an  option  to  purchase  the  telegraph  prop- 
erties at  their  appraised  value.  This  option  is  still 
in  full  force  and  effect. 

President  Grant  joined  with  Postmaster- General  Cress- 
well  in  "deprecating  further  delay  "  by  Congress  in  provid- 
ing fully  for  the  acquisition  of  the  wire  lines  of  the  country. 

Nearly  every  Postmaster-General  since  that  time,  in- 
cluding Messrs.  Howe,  Gresham,  Wanamaker,  Payne, 
Cortelyou,  and  my  predecessor,  Mr.  Hitchcock,  have 
recommended  the  acquirement  of  the  wire  lines,  the 
construction  of  others  by  the  Government  or  the  utili- 
zation in  some  form  of  the  wires  in  connection  with  the 
Postal  Service. 

Since  1871  more  than  70  bills  have  been  introduced  in 
Congress  providing  for  the  purchase  or  control  by  the 
Government  of  the  telegraph  lines,  and  more  than  a  score 
of  those  bills  have  been  reported  favorably  by  Senate 
or  House  Committees. 

The  purchase,  lease,  or  other  forms  of  Government  con- 
trol of  the  wires  have  been  advocated  by  many  Senators 
and  Representatives  of  all  parties  and  by  such  outstand- 
ing national  figures  as  Henry  Clay,  Charles  Sumner, 
Hannibal  Hamlin,  and  Senators  Edmunds,  Dawes,  and 
Chandler. 

The  objection  based  on  the  supposed  advantages  the 
party  happening  to  be  in  power  would  gain  through 
Government  ownership,  either  in  making  use  of  private 
information  contained  in  wire  messages  or  by  forcing 
the  added  number  of  Government  employes  to  support  it 
with  their  ballots,  is  answered,  I  think  adequately,  by 
our  experience  with  the  Postal  Service,  the  management 
of  which  gives  no  special  advantage  to  any  political  party. 


Public  Control  of  Wire  Communications  97 

In  truth,  in  a  strict  sense  of  practical  politics,  I  believe 
responsibility  for  its  management  carries  distinct  dis- 
advantages. 

Congress  already  by  special  legislation  has  made  it 
a  criminal  offense  to  make  use  for  political  purpose  of 
any  information  passing  over  the  wires  and  provided 
heavy  penalties  for  divulging  the  contents  of  private 
messages.  In  fact  the  law  already  throws  around  tele- 
graph and  telephone  messages  all  the  safeguards  as  to 
privacy  that  exist  with  respect  to  sealed  communica- 
tions. No  doubt  similar  protection  in  political  action 
as  now  given  Postal  Department  employees  would  be 
afforded  persons  associated  with  the  wires  service  under 
permanent  Government  ownership. 

Whatever  disadvantages  the  further  extension  of  Gov- 
ernment operations  might  entail  would  certainly  be 
outweighed  by  the  many  advantages  that  would  accrue 
to  it  and  the  public  through  the  complete  and  per- 
manent amalgamation  of  the  means  of  all  electrical 
communication  of  intelligence  with  the  Postal  Service. 

II 

SHOULD  THE  GOVERNMENT  OWN  THE  TELEGRAPHS? 

BY  CLARENCE   H.    MACKAY 

President  of  the  Postal  Telegraph-Cable  Company 

An  article  by  the  Postmaster-General,  Mr.  Burleson, 
strongly  advocating  Government  ownership  and  opera- 
tion of  telegraphs  in  accordance  with  his  recommenda- 
tion in  his  annual  reports  in  the  past  as  Postmaster- 
General,  raises  the  question  very  sharply,  now  that  the 
Postmaster-General  has  actually  seized  the  telegraph  lines 
under  the  war  power  of  the  Government,  even  though 


98  Reconstructing  America 

he  has  to  return  them  when  the  treaty  of  peace  is  signed. 
Mr.  Burleson's  argument  is  cheapness  of  rates ;  any 
deficit  to  be  paid  by  taxation.  Is  that  argument  sound? 

USE   OF   TELEGRAPH  LIMITED 

The  telegraph  differs  from  every  other  public  utility 
in  that  the  telegraph  is  not  used  by  the  great  majority 
of  people.  Farmers  use  it  very  rarely.  The  laboring 
classes  use  it  little,  if  at  all.  The  clerical  classes  have 
little  occasion  to  use  it,  and  even  the  social  use  of  the 
telegraph  is  negligible.  One  of  the  great  telegraph 
companies  states  that  only  three  or  four  per  cent  of  its 
entire  telegraph  business  is  from  these  classes.  Over 
70  per  cent  of  the  entire  telegraph  business  of  the  United 
States  originates  in  forty  cities,  these  being  the  large 
commercial  cities  of  the  country,  the  population  of  which 
represents  20  per  cent  of  the  total  population  of  the 
country.  The  fact  is  that  the  telegraph  is  a  commercial 
agent,  almost  exclusively,  and  its  expense  is  a  part  of 
the  cost  of  the  business  of  the  banker,  broker,  manu- 
facturing, and  mercantile  classes.  Hence  any  attempt 
to  give  them  cheap  telegraph  service  at  the  expense  of 
the  taxpayer  is  unfair  and  discriminatory. 

Post  office  locations  are  selected  with  a  view  to  serving 
the  whole  population  of  each  city,  town,  and  locality, 
and  in  most  cases  are  not  located  to  serve  that  part  of 
the  public  that  uses  the  telegraph  in  its  business ;  and 
Mr.  Burleson's  idea,  that  the  public  must  come  to  the 
post  office  to  transact  their  telegraph  business,  no  matter 
where  those  offices  are  located,  will  not  appeal  to  those 
who  in  the  rush  hours  of  the  day  must  conserve  their 
time  and  the  time  of  their  employees. 


Public  Control  of  Wire  Communications  99 

The  banker,  broker,  manufacturer,  or  merchant  wishes 
quick  and  accurate  telegraph  service,  and  does  not  want 
slow  telegraph  service  or  inaccurate  service.  He  is 
willing  to  pay  a  fair  price  for  his  telegrams,  and  he  con- 
siders the  present  telegraph  rates  as  fair.  He  does 
not  wish  or  expect  to  get  cheap  telegraph  service  at  the 
expense  of  speed  and  accuracy,  and  especially  so  to  get 
this  cheap  service  at  the  expense  of  the  taxpayer.  He 
is  not  interested  in  this  movement  for  Government  owner- 
ship and  operation.  Neither  is  the  taxpayer  in  its 
favor ;  nor  are  the  great  mass  of  people,  who  do  not  use 
the  telegraph  at  all,  and  would  not  use  it  even  if  the 
charges  were  less.  Hence  I  see  no  occasion  for  the 
Government  interfering  with  the  present  competitive 
system. 

OUR   TELEGRAPH   RATES   CHEAPEST   IN   THE   WORLD 

In  Europe  the  Governments  own  and  operate  the 
telegraph  systems,  but  instead  of  their  telegraph  rates 
being  cheaper  than  the  American  rates,  they  are  higher 
-  to  say  nothing  of  the  well-known  inefficiency  of  the 
telegraph  service  throughout  Europe.  I  have  yet  to 
learn  of  a  business  man  who  has  traveled  abroad  and 
who  does  not  hold  this  view.  Telegraph  rates  in  the 
United  States  are  the  cheapest  in  the  world.  This  is 
not  generally  understood,  because  the  published  rate 
abroad  seems  cheap  until  one  ascertains  that  every  word 
in  the  address,  signature,  etc.,  is  charged  for,  as  well  as 
every  word  in  the  body  of  the  message.  In  the  United 
States  only  the  words  in  the  body  of  the  message  are 
charged  for.  Now,  in  the  United  States  there  are  four- 
teen words  on  the  average  in  the  address,  signature,  etc., 


100  Reconstructing  America 

in  a  telegram,  in  addition  to  the  words  in  the  body  of 
the  message.  The  following  table  gives  the  compara- 
tive toll  on  telegrams  of  equal  length. 

Average  Charge  for  a 

Domestic  or  Intrastate 

Telegram  Containing 

Ten  Text  Words 

France $0.29 

Norway 29 

Sweden .25 

Great  Britain 30 

Germany .30 

Italy 29 

Denmark .30 

Austria .29 

United  States 25  to  .30 

The  above  rate  at  25  cents  or  30  cents  for  telegrams  in 
the  United  States  is  between  two  points  in  the  same 
State,  the  distance  being  about  the  same  as  between 
two  points  in  any  foreign  country.  When  we  come  to 
telegrams  in  the  United  States  for  longer  distances  the 
only  comparison  that  can  be  made  with  European  rates 
is  telegrams  in  Europe  between  different  countries,  on 
account  of  the  long  distances  traveled  by  the  average 
long-distance  telegram  in  the  United  States.  For  in- 
stance, from  Paris  to  Vienna  is  about  650  miles,  and  the 
cost  for  a  ten-word  message,  plus  the  address  and  signa- 
ture charged  for,  is  96  cents,  as  against  only  40  cents, 
address  and  signature  free,  for  a  similar  distance  in  the 
United  States.  From  Stockholm  to  Paris  (1,000  miles) 
the  rate  for  a  ten-word  message,  plus  the  address  and 
signature  charged  for,  is  $1.20.  From  New  York  to 
Chicago,  about  the  same  distance,  the  rate  for  a  ten-word 
message,  address  and  signature  free,  is  50  cents. 


Public  Control  of  Wire  Communications   101 

CONVENIENCES   DENIED   IN   EUROPE 

In  addition  to  the  above  there  are  other  advantages 
of  the  American  system.  The  American  telegraph 
companies  send  messengers  to  collect  and  deliver  tele- 
grams and  maintain  call-box  systems.  The  American 
companies  keep  open  accounts  for  their  customers  and 
keep  offices  in  hotels,  apartment  houses,  and  competitive 
offices  in  all  parts  of  large  cities.  The  European  govern- 
ments do  nothing  of  this  kind.  There  the  telegram  must 
be  taken  to  the  telegraph  office ;  the  sender  cannot  run  up 
an  account ;  he  must  prepay  the  charge,  and  may  have  to 
go  a  long  distance  before  finding  a  main  or  branch  office. 

American  business  supremacy  is  based  upon  the 
despatch  and  facility  with  which  things  are  accomplished. 
The  American  business  man  will  never  consent  to  the 
substitution  of  European  methods  of  handling  telegraph 
correspondence  as  now  proposed  by  the  American 
Postmaster- General.  Here,  the  business  man  prepares 
a  batch  of  telegrams  and  cablegrams,  rings  for  a  com- 
pany's messenger  by  means  of  a  convenient  call-box 
installed  free  of  charge  by  the  Company,  and  dismisses 
them  from  his  mind.  Competition  insures  their  prompt 
transmission  under  a  charge  account.  In  Europe  the 
business  man  must  first  reckon  the  cost  of  his  message, 
send  one  of  his  employees  to  a  post  office  with  them  or  go 
himself,  the  postal  clerk  calculates  the  charge  —  when 
he  finds  time  —  you  purchase  stamps  and  affix  them 
yourself,  hand  messages  back  to  the  postal  clerk  and 
trust  to  Providence  that  they  will  reach  their  destina- 
tion in  an  intelligible  manner.  Complaints  are  met  with 
a  shrug  of  the  shoulders. 


102  Reconstructing  America 

The  National  Association  of  Public  Service  and  Rail- 
road Commissioners  of  the  various  States  at  a  conven- 
tion held  in  San  Francisco,  October  12,  1915,  received  a 
report  of  its  Committee  on  Telephone  and  Telegraph 
Rates  and  Service  containing  the  following : 

"As  far  as  this  Committee  is  informed,  there  seems  to 
be  no  complaint  on  the  part  of  the  public  as  to  the  service 
and  rates  of  telegraph  companies." 

CHEAPER  RATES  WOULD  NOT  INCREASE  USE 

Mr.  Burleson  thinks  that  cheap  telegrams  would  in- 
crease their  use  by  the  great  mass  of  the  people.  He 
gives  no  reason  for  thinking  so.  Nobody  uses  the  tele- 
graphs for  transmitting  communications  unless  those 
communications  are  more  or  less  urgent,  and  a  cheap 
telegraph  service  would  not  appeal  to  the  great  mass  of 
people  because  their  communications  are  not  of  an  urgent 
nature.  They  probably  would  not  use  the  telegraphs  to 
any  greater  extent  at  the  i5-cent  rate  than  they  do  now 
at  the  25-cent  rate.  The  telephone  has  displaced  the 
local  use  of  the  telegraph  ;  in  other  words,  has  displaced 
telegrams  between  towns  not  far  distant. 

The  telegraph,  in  the  course  of  trade,  and  by  the  com- 
petition of  the  telephone,  has  become  more  or  less  re- 
stricted to  the  use  of  the  banker,  broker,  manufacturer, 
and  merchant  in  carrying  on  commercial  transactions, 
and  they  do  not  want  the  telegraph  service  injured  by 
cheapness,  slowness,  or  inaccuracy.  The  great  mass  of 
the  public  are  not  interested  at  all  in  the  subject,  except- 
ing, of  course,  that  they  do  not  wish  to  have  their  taxes 
increased.  Is  the  taxpayer  to  be  ignored? 


Public  Control  of  Wire  Communications    103 


BRITISH   GOVERNMENT  FINANCIAL  LOSS 

In  Great  Britain  some  forty  years  ago  the  British 
Government  bought  the  telegraphs  and  paid  about 
$50,000,000  for  them.  For  two  years,  namely,  1870  and 
1871,  the  Government  made  a  small  profit  after  charging 
interest  on  the  debentures  issued  for  the  purchase,  but 
since  that  time  there  has  been  an  annual  deficit  after 
providing  interest.  In  a  speech  in  the  House  of  Com- 
mons on  April  30,  1914,  Postmaster-General  Hobhouse, 
of  Great  Britain,  said  that  within  the  last  forty  years 
the  telegraph  expenditures  of  the  British  Government 
exceeded  the  telegraph  receipts  by  $110,000,000,  not 
including  interest  on  the  original  purchase  money  nor 
interest  on  the  annual  losses,  nor  any  provision  for  amorti- 
zation. If  these  were  included,  the  loss  would  have  been 
$200,000,000.  The  annual  loss  is  shown  by  the  follow- 
in";  table : 


TOTAL  ANNUAL 

YEAR 
ENDING 
MARCH  31 

RECEIPTS 

ACTUAL 
OPERATING 
EXPENSES 

OPERATING 
Loss 

Loss,  INCLUDING 
INTEREST  PAID 
AND  FRESH 
MONEY 

EXPENDED 

1  908    . 

$15,516,805 

$17,542,840 

$2,026,035 

$4,847,423 

I90Q     .       . 

15,492,260 

18,361,270 

2,869,010 

5,233,785 

1910    . 

15,827,745 

17,995,39° 

2,167,645 

5,246,065 

191  1    . 

15,830,035 

18,478,075 

2,648,040 

5,933.365 

1912'  . 

15,747,420 

18,786,840 

3,039,420 

5,340,740 

1913    .      . 

15,881,635 

17,620,250 

I,738,6i5 

5,8/6,735 

I9M    •      • 

15,591,080 

17,545,050 

1,953,9/0 

6,058,710 

1915    .      . 

17,094,770 

18,570,990 

1,476,220 

6,164,775 

As  late  as  February  21,  1916,  a  committee  appointed 
by  the  British  Government  to  look  into  the  question  of 


104  Reconstructing  America 

retrenchment  in  the  public  expenditure,  reported  on  the 
Government-owned  telegraphs  as  follows  : 

"The  history  of  the  Telegraphs  is  most  unsatis- 
factory. They  were  taken  over  in  1870  at  a  cost 
(including  capital  expenditures  on  extensions)  of 
£10,129,687  ($50,648,435)  in  the  anticipation  that 
they  would  yield  a  profit  to  the  State.  After  the 
second  year  of  post  office  management  the  profit 
failed  to  cover  interest  on  the  capital  outlay.  Year 
by  year  the  financial  position  has  grown  worse. 
In  recent  years  the  loss  upon  working  has  not 
been  less  than  £1,000,000  ($5,000,000)  a  year,  and 
this  loss  includes  nothing  for  interest  due  to  the 
State  upon  the  aggregate  losses  of  previous  years." 

If  the  British  Government  had  left  the  telegraphs  in 
the  hands  of  private  individuals,  the  rates  would  have 
been  just  as  reasonable  as  now  and  the  Government 
would  have  avoided  the  loss  of  not  only  about 
$200,000,000,  but  also  of  the  taxes  which  it  would  have 
been  receiving  from  the  private  companies,  and  the 
interest  on  both  of  these  sums,  and  the  public  would  have 
been  receiving  a  much  improved  service. 

Major  W.  A.  J.  O'Meara,  formerly  Engineer  in  Chief 
of  the  British  Post  Oifice  Telegraphs,  in  referring  to 
the  question  of  Government  Ownership  of  Telegraphs, 
writes  as  follows : 

"Since  the  outbreak  of  the  war  the  public  has 
been  brought  into  contact  with  Government  de- 
partments at  many  more  points  than  was  previously 
the  case ;  the  result,  judging  by  the  attitude  of  the 
commercial  community,  seems  to  have  been  to 


Public  Control  of  Wire  Communications   105 

strengthen,  rather  than  to  weaken,  its  opposition 
to  governmental  control  of  matters  of  vital  interest 
to  the  industries  and  commerce  of  the  country  - 
in  this  category  cable  communications  naturally 
fall." 

OVERHEAD   CHARGES   NEGLIGIBLE   QUANTITY 

Mr.  Burleson  states  that  at  present  the  public  pay 
overhead  charges  of  the  two  telegraph  companies,  and 
also  dividends  on  their  capital  stock.  As  to  the  dividends, 
they  are  reasonable,  and  the  Government  would  have 
to  pay  the  interest  on  the  purchase  price,  and  this  would 
be  a  substitute  for  dividends.  As  to  the  overhead 
charges,  the  question  at  once  arises  whether  the  over- 
head charges  of  the  two  companies  would  compare  for 
an  instant  with  the  increased  operating  expense  if  the 
Government  should  undertake  the  operation.  The  so- 
called  overhead  expenses  referred  to  by  Mr.  Burleson 
are  the  expense  of  supervision  over  the  operations  of  a 
telegraph  company,  and  this  expense  in  the  case  of  one 
of  the  largest  telegraph  companies  is  only  about  2 
per  cent  of  its  receipts.  Competent  supervision  by  ex- 
perienced managers  whose  salaries  go  to  make  up  the 
overhead  expense  is  more  than  offset  by  the  economies 
effected  by  them  in  the  cost  of  handling  the  traffic. 
No  one  who  is  familiar  with  the  results  of  Government 
operation  of  anything,  will  doubt  for  a  moment  that  the 
overhead  charges  of  the  present  two  telegraph  companies 
would  be  a  drop  of  water  as  compared  with  the  flood 
of  increased  operating  expense  if  the  Government  ever 
acquired  and  operated  the  telegraph  lines. 

Furthermore,  it  is  a  well-known  fact  that  the  lines  of 


106  Reconstructing  America 

the  two  telegraph  companies  are  filled  to  capacity  during 
the  business  hours  of  the  day,  and  that  the  trunk  lines 
are  well  occupied  during  the  night,  so  that  this  disposes 
of  any  question  of  duplication  of  facilities. 

COMPETITION    VERSUS  MONOPOLY 

After  all,  the  main  question  is  whether  competition  in 
telegraph  service  is  wanted  or  not.  Government  owner- 
ship and  operation  means  a  monopoly.  Continuation 
of  the  present  two  telegraph  companies  means  competi- 
tion. Competition  means  keen  rivalry  in  service.  It 
means  efficiency.  It  means  constant  improvement  of 
equipment.  It  means  a  greater  desire  to  please,  and 
more  courteous  treatment  to  the  public. 

If  the  American  people  prefer  to  take  the  chances 
of  insufficient  Government  telegraph  service,  and  the 
chances  of  getting  a  lower  telegraph  rate  to  be  made  up 
largely  by  taxation,  and  to  take  the  chances  of  the  tele- 
graph systems  being  turned  into  a  political  machine 
for  the  benefit  of  the  party  which  may  happen  to  be  in 
power,  then  Government  ownership  and  operation  of 
telegraphs  will  come.  If,  on  the  other  hand,  the  public 
come  to  realize  that  the  telegraph  service  differs  from 
every  other  kind  of  public  utility,  in  that  telegraph 
service  is  a  commercial  instrument  practically  for  com- 
merce alone,  and  is  not  used  and  would  not  be  used, 
even  under  Government  ownership,  by  the  great  mass 
of  the  people,  and  that  any  reduction  in  telegraph  rates 
would  be  followed  by  taxation  to  make  up  the  defi- 
ciency, and  that  the  telegraph  systems  would  certainly 
become  political  machines,  and  that  the  service  itself 
would  inevitably  deteriorate  in  speed  and  accuracy 


Public  Control  of  Wire  Communications   107 

by  the  Government  management,  then  there  is  little 
probability  of  Mr.  Burleson's  idea  being  adopted  by 
the  American  people. 

DANGERS   OF  POLITICAL   CONTROL 

The  American  public  are  keenly  suspicious  of  politi- 
cal influences  controlling  the  wires  for  partisan  pur- 
poses, and  one  of  the  most  disastrous  things  that  could 
threaten  our  free  institutions,  and  which  would  aim  at 
the  very  foundations  of  the  Government  itself,  would 
be1  to  allow  the  channels  of  communication,  whether 
telegraph,  telephone,  or  cable,  to  be  brought  under 
political  control.  Without  a  free  telegraph  you  cannot 
have  a  free  press,  because  the  telegraph  is  the  feeder  of 
the  press.  Any  proposal,  therefore,  that  the  Govern- 
ment take  over  the  telegraphs  might  just  as  well  embody 
a  proposal  to  have  the  press  controlled  by  the  Govern- 
ment. 

Where  there  are  two  separate  and  distinct  companies, 
with  absolutely  no  union  of  interest,  fiercely  competing 
for  the  telegraph  business  of  the  country,  this  danger  of 
political  control  is  removed,  and  thus  is  far  superior  and 
far  more  desirable,  from  the  standpoint  of  the  national 
welfare,  than  a  Government-owned  telegraph  system 
under  the  domination  of  a  political  administration. 

It  is  not  such  a  far  cry  back  to  1884,  when  the  result 
of  the  contest  between  Cleveland  anjd  Elaine  hung  upon 
the  close  vote  in  New  York,  and  the  belief  that  the  re- 
turns were  held  up  by  the  Western  Union  Telegraph 
Company  nearly  precipitated  a  riot  in  New  York.  A 
similar  situation  might  have  arisen  in  the  last  Presiden- 
tial election,  which  was  not  decided  for  several  days, 


108  Reconstructing  America 

had  the  telegraphs  been  in  the  hands  of  either  a  Govern- 
ment or  a  private  monopoly. 

One  of  the  most  potent  examples  of  the  danger  of 
Government  ownership  is  Germany.  The  German 
Government  either  owned  or  controlled  all  the  agencies 
and  avenues  of  intelligence  which  entered  most  into  the 
daily  life  of  the  people.  The  result  was  a  condition 
where  the  people  were  gradually  brought  under  the  con- 
trol of  an  oligarchy  which  held  the  life  and  destiny  of  the 
nation  in  its  hands,  to  do  with  as  it  chose.  If  we  do 
not  want  a  repetition  of  such  a  condition  in  the  United 
States  we  will  avoid  Government  ownership,  especially 
of  the  lines  of  communication. 

MR.  MACKAY'S  LETTER  TO  CONGRESS 

Since  writing  the  foregoing  Mr.  Mackay  sent  the 
following  letter  to  every  member  of  Congress  : 

I  realize  and  respect  the  responsibilities  of  the  mem- 
bers of  Congress  of  the  United  States,  and  as  an  Ameri- 
can citizen  and  president  of  the  Postal  Telegraph  Cable 
Company  and  the  Commercial  Cable  Company,  I 
would  earnestly  request  that  you  consider  carefully  the 
proposed  joint  resolution  which  has  been  reported  to 
the  House  of  Representatives  by  the  Committee  on 
Post  Office  and  Post  Roads,  extending  to  December  31, 
1919,  the  control  of  the  Postmaster- General  over  the 
telegraphs  and  telephones. 

SAYS   SERVICE   IS   WORSE 

From  the  statements  made,  written  or  orally,  by 
Theodore  N.  Vail,  of  the  American  Telephone  and  Tele- 
graph Company,  Newcomb  Carlton,  of  the  Western 


Public  Control  of  Wire  Communications   109 

Union  Telegraph  Company,  and  Postmaster- General 
Burleson  at  the  hearing  on  the  so-called  Moon  resolu- 
tion, they  have  apparently  determined  in  their  minds 
that  the  Postmaster- General  shall  keep  control  as 
long  as  possible  of  the  telegraph  and  telephone  lines, 
especially  the  latter,  in  order  to  give  those  companies 
guaranteed  government  compensation,  and  to  finance 
them,  and,  most  important  of  all,  to  increase  telephone 
rates,  which  increase  has  been  ordered  throughout  the 
country. 

I  therefore,  respectfully  submit  the  following : 
i.  Not  the  slightest  reason  is  given  for  Mr.  Burle- 
son's  continuing  control  of  the  telegraph  lines  to  De- 
cember 31,  1919.  They  do  not  need  any  financing. 
Their  service  is  steadily  growing  worse  under  his  manage- 
ment. There  is  no  war  necessity  for  such  continued 
control.  Nothing  has  been  done  by  the  Postmaster- 
General  since  he  took  control  August  i  last,  except  to 
give  a  high  compensation  to  the  Western  Union  Tele- 
graph Company  and  disturb  the  morale  of  the  stall 
of  the  Postal  Telegraph  Company  and  attempt  to  raise 
telegraph  rates.  The  public  wishes  telegraphic  compe- 
tition restored.  The  public  does  not  agree  with  Mr. 
Burleson,  in  his  remarks  before  the  House  Committee  on 
January  21,  that  "Competition  should  be  eliminated; 
the  period  for  competition  is  passed."  The  West- 
ern Union  wishes  to  advance  telegraph  rates  under 
the  shield  of  Mr.  Burleson's  control,  but  the  Postal 
refuses.  Meantime  the  Government  is  losing  money 
daily  on  its  guaranteed  compensation  to  the  Western 
Union,  and  that  should  be  stopped  summarily.  The 
extension  of  time  from  the  proclamation  of  peace  to 


110  Reconstructing  America 

December  31,  under  these  circumstances,  would  be  un- 
constitutional. There  is  no  excuse  for  the  telegraph 
lines  not  being  returned  at  once  to  the  two  companies. 

2.  The  above  reasons,  and  still  more  powerful  reasons, 
pertain  to  the  cables.     International  complications  have 
arisen.     The  record  of  the  House  Committee  on  the 
Post  Office  of  January  21,  shows  that  the  British  Govern- 
ment has  issued  an  order  containing  the  following  : 

"His  Majesty's  Government  does  not  agree  to  either 
company  allowing  control  of  its  stations,  staff,  or  working 
in  the  United  Kingdom,  by  the  other  company  or  by 
any  person  acting  directly  or  indirectly  on  behalf  of  the 
United  States  Government." 

SHOULD    BE    TURNED   BACK 

The  cables  should  be  turned  back  at  once,  especially 
as  nothing  has  been  done  in  regard  to  them  by  the 
Postmaster-General  except  to  remove  officers  of  the  Com- 
mercial Cable  Company. 

3.  Mr.  Burleson's  argument  as  to  the  telephones  is 
not  convincing.     He  is  raising  telephone  rates  through- 
out the  country  to  an  enormous  extent  against  a  storm 
of  protest  and   injunction   suits.     He  does   not   claim 
that  there  is  any  war  necessity  involved.     The  purposes 
are  clear  — •  namely,   to   raise   telephone  rates,   finance 
crippled    telephone    companies    and    enable    the    Bell 
company  to  gather  in  the  competing  telephone  com- 
panies.    How  this  can  be  justified  under  the  war  power 
we  fail  to    see.     Meantime    telephone   service  is  dete- 
riorating rapidly,  and  the  losses  to  the  Government  on 
guaranteed  compensation,  especially  to  the  Bell  company, 
will  be  enormous. 


Public  Control  of  Wire  Communications   111 

The  companies  of  which  I  am  president  are  fully 
capable  of  conducting  their  business  and  financing  their 
present  needs  and  future  extensions  without  any  in- 
crease in  rates.  If  the  Post-Office  Department  should 
order  an  increase  in  rates  (and  we  believe  an  increase  in 
rates  is  unjustifiable  at  this  time)  we  shall  put  those 
rates  into  effect  under  protest  and  shall  allow  them  to 
continue  only  during  the  time  of  Government  control. 
In  my  judgment  the  lines  should  be  turned  back  to 
their  owners  immediately,  as  it  is  not  pleasing  or  con- 
ducive to  good  management  to  have  our  business  con- 
trolled as  it  is  to-day  by  orders  of  the  Postmaster- General 
given  through  our  competitors  in  business. 

We  think  it  eminently  unfair  that  a  committee  made 
up  of  Union  N.  Bethell,  of  the  American  Telephone 
and  Telegraph  Company,  G.  M.  Yorke,  of  the  West- 
ern Union  Telegraph  Company,  F.  A.  Stevenson,  of  the 
American  Telephone  and  Telegraph  Company,  and  A.  F. 
Adams,  of  the  Kansas  City  Home  Telephone  Company, 
three  of  them  officials  of  competitor  companies,  should 
be  authorized  to  exercise  a  dominance  in  our  affairs. 
I  submit  these  views  and  facts  to  you,  the  representa- 
tives in  Congress  of  the  American  people,  .depending 
upon  your  sense  of  fairness  and  good  judgment. 

I  would  earnestly  request  that  the  resolution  reported 
by  the  House  Committee  on  Post  Office  and  Post  Roads 
be  amended  so  that  the  telegraph  and  cable  lines  are 
turned  back  to  the  companies  at  once. 


CHAPTER  VI 

I 
CONSTRUCTIVE   FINANCE 

SOME  PHASES  OF  FINANCIAL  RECONSTRUCTION 

BY  PAUL  Mr  WARBURG 

As  destruction  once  begun  on  the  battlefield  spread 
its  waves  until  its  effects  had  reached  all  parts  of  the 
world,  so  the  work  of  reconstruction  will  involve  the 
whole  globe  far  beyond  the  centers  originally  affected ; 
and  as  the  character  and  extent  of  the  disturbance 
differ  in  each  country  affected,  so  the  word  "reconstruc- 
tion" will  have  a  very  different  meaning  in  the  various 
parts  of  the  world.  Considering  the  question  merely 
from  the  domestic  point  of  view,  "the  movement  back 
to  normal "  would  appear  as  the  main  aim  and  character- 
istic of  our  own  problem  of  reconstruction. 

Several  thoughts,  however,  will  at  once  occur  to  us 
at  this  point  and  emphasize  the  complexity  of  our  task. 

First,  that  the  normal  of  the  past  is  not  likely  to 
be  the  normal  of  the  future,  which  raises  the  further 
question  of  what  that  normal  ultimately  will  be ; 

Second,  that  between  our  present  level  and  that  of 
the  future  there  will  of  necessity  be  a  period  of  transi- 
tion —  which  raises  the  question  of  how  long  or  how 
short  it  should  be  ; 

Third,  that  both  on  account  of  the  moral  obligation 

112 


Constructive  Finance  113 

involved  and  on  account  of  the  effect  that  reconstruc- 
tion in  other  countries  must  needs  exercise  upon  our 
own  future  economic  and  financial  development,  we 
cannot  possibly  consider  the  problem  as  a  purely  domes- 
tic one  —  which  raises  the  question  of  purchases  on 
credit  by  foreign  countries  and  the  influence  of  foreign 
purchases  upon  the  course  of  prices ; 

And,  finally,  that  the  return  to  the  new  normal 
level  must  not  be  construed  simply  to  refer  to  the  level 
of  prices  and  wages,  but  that  it  includes  the  new  form 
of  Government  influence  in  business  —  which  raises 
the  question  of  the  restoration  of  the  freedom  of  indi- 
vidual action  and  operation,  willingly  surrendered  in 
the  face  of  war,  but  held  sacred  and  inviolable  in  times 
of  peace. 

A   FORECAST 

As  I  look  through  the  telescope  into  the  period  fol- 
lowing that  of  transition,  I  see  a  United  States  to  which 
the  world  at  large  will  be  heavily  indebted,  and  to  which 
annually  hundreds  of  millions  of  dollars  will  be  due  as 
interest  on  loans  extended,  in  addition  to  the  hundreds 
of  millions  due  in  payment  of  the  raw  materials  we  shall 
be  able  to  spare  for  other  countries.  I  see  an  indus- 
trially highly  developed  country,  which,  with  the  excep- 
tion of  a  limited  number  of  articles,  will  be  capable 
of  producing  most  of  the  necessaries  of  life  for  the  con- 
sumption of  its  own  people.  I  perceive,  therefore,  a 
country  amply  protected  by  a  Vast  annual  international 
credit  balance,  a  country  which,  by  keeping  some  por- 
tion of  its  foreign  security  holdings  in  the  form  of  reason- 
ably short  obligations,  should  be  able  to  protect  itself 


114  Reconstructing  America 

against  any  serious  encroachment  upon  this  creditor 
position ;  a  country  owning  a  huge  gold  stock,  a  country, 
in  short,  which  need  not  give  itself  any  great  concern 
with  regard  to  its  power  to  maintain  the  parity  of  the 
dollar  exchange  all  over  the  world. 

I  much  misread  the  future  if  it  does  not  have  in  store 
for  New  York  the  position  of  a  world-exchange  center, 
vying  with  London  as  a  free  gold  and  discount  market. 
As  I  see  it,  our  future  economic  position  will  be  of 
such  strength  that  it  will  be  difficult  for  many  countries 
to  keep  their  exchanges  at  par  with  us.  They  are  not 
likely  to  have  sufficient  quantities  of  the  goods  required 
by  us,  nor  will  they  have  large  amounts  of  gold  to  spare, 
and,  therefore,  in  payment  of  the  things  we  sell  them 
and  of  the  interest  they  will  have  to  pay  us,  they  will 
have  to  try  to  find  something  else  than  goods  that  we 
may  purchase  from  them.  That  is,  they  will  offer 
us  the  individual  or  collective  obligations  of  their 
nationals,  or  their  industrial  enterprises,  or  such  securi- 
ties or  assets  of  other  countries  as  they  control.  If  we 
want  these  countries  to  continue  to  be  able  to  buy  our 
goods,  it  is  therefore  incumbent  upon  us  to  prepare 
ourselves  to  grant  these  foreign  credits  and  to  buy  and 
assimilate  these  foreign  assets. 

MUST   EXTEND   OUR   ACCEPTANCES 

In  order  to  carry  out  this  program  several  things 
are  necessary.  First,  our  banks  must  be  able  and  will- 
ing freely  to  extend  their  acceptances  for  the  financing 
of  the  world's  trade.  It  is  inevitable,  if  our  banks  and 
bankers  continue  to  show  the  same  spirit  of  enterprise 
and  patriotism  they  have  demonstrated  during  the  war, 


Constructive  Finance  115 

that  in  the  financing  of  the  world's  current  trade  we 
shall  have  a  very  large  share. 

To  that  end  the  discount  rates  of  trie  Federal  Reserve 
banks  and  the  policy  of  the  Federal  Reserve  Board 
with  respect  to  acceptance  transactions  must  continue 
to  be  liberal.  I  can  well  foresee  the  time  when  American 
dollar  acceptances  will  be  outstanding  to  the  extent 
of  more  than  one  billion  dollars  in  credits  granted  all 
over  the  globe.  And  as  our  banking  power  and  ma- 
chinery develop,  there  unfold  new  opportunities  for 
foreign  branches  of  American  banks. 

In  order  to  bring  about  in  the  United  States  the  suc- 
cessful absorption  on  a  large  scale  of  foreign  securities, 
it  is  necessary  that  our  investing  public  be  educated 
properly  to  appreciate  these  foreign  investments.  Inti- 
mate commercial  relations  with  foreign  countries  create 
the  atmosphere  of  understanding,  interest,  and  sym- 
pathy which  alone  renders  possible  comprehensive 
international  financing ;  and  inversely  it  is  such  financing 
that  encourages  the  growth  of  trade  relations. 

A   PEACE   FINANCE   CORPORATION 

In  these  circumstances,  it  occurred  to  me  some  time 
ago  that  by  converting  the  War  Finance  Corporation 
into  a  Peace  Finance  Corporation  and  authorizing  it 
to  acquire  directly,  or  make  advances,  on  foreign  securi- 
ties, we  might  create  an  instrument  that  would  pro- 
mote our  foreign  trade  and  at  the  same  time  greatly 
assist  foreign  nations  in  need  of  our  support  during  a 
period  of  political  and  economic  transition.  Such  a 
Peace  Finance  Corporation,  enjoying  the  prestige  and 
strength  flowing  from  the  $500,000,000  capital  sub- 


116  Reconstructing  America 

scribed  by  the  United  States,  could  exercise  effectively 
its  power,  within  certain  limits  and  for  a  limited  number 
of  years,  to  issue  its  own  obligations  against  the  foreign 
securities  acquired.  In  doing  so  it  might  render  services 
of  the  very  greatest  value  in  bridging  a  critical  interval. 
At  the  same  time,  it  would  keep  the  Government  out  of 
direct  touch  with  business  transactions,  with  which, 
for  a  thousand  obvious  reasons,  it  had  better  remain 
unconnected. 

WORLD-WIDE   INFLATION 

We  are  near  the  crest  of  the  wave  of  world- wide  infla- 
tion. As  it  was  generated  and  fostered  by  a  chain  of 
interlocking  effects  and  reactions  of  extraordinary  de- 
mands for  certain  goods,  reduced  power  of  production 
of  others,  rising  prices,  rising  wages,  vast  issues  of  Gov- 
ernment bonds  and  circulating  notes,  so  with  the 
approaching  end  of  the  issues  of  Government  loans 
we  may  expect  to  see  the  beginning  of  a  gradual  con- 
traction of  note-issues  and  deflation  of  prices  and  wages 
and  a  return  to  more  normal  conditions  of  production 
and  consumption. 

As  far  as  the  banking  situation  is  concerned,  deflation 
will  have  to  be  brought  about  primarily  by  the  people's 
efforts  to  save  and  by  a  contraction  of  loans  following 
the  shrinkage  of  prices  of  goods  and  reduction  of  the 
volume  of  inventories. 

Some  hold  the  view  that  increased  production  of 
goods  rather  than  banking  deflation  may  bring  us  back 
to  a  normal  relation  between  money  and  goods.  My 
own  belief  is  that  the  solution  must  be  sought  in  efforts 
from  both  ends.  The  resultant  line  indicating  the 


Constructive  Finance  117 

trend  of  prices  and  deflation  would  then  lie  somewhere 
around  midway  between  the  highest  and  lowest  points. 

PROBLEM  OF   GOLD  DEMONETIZATION 

Perhaps  I  should  say  a  word  at  this  junction  concern- 
ing the  much  mooted  question  of  the  demonetization 
of  gold  as  a  world  medium  of  exchange.  In  considering 
the  suggestions  made  in  this  connection  I  have  to  think 
of  the  deaf  old  lady  who,  when  asked  by  her  table 
neighbor  whether  she  liked  red  bananas,  answered : 
"No,  my  dear,  I  prefer  the  old-fashioned  night  shirt." 
I  confess,  when  dealing  with  this  problem,  that  I,  too, 
am  old-fashioned.  I  believe  that  gold  as  a  medium  of 
actual  circulation  within  the  border  lines  of  countries 
will  more  and  more  be  relegated  to  the  past ;  but  that 
as  a  basis  for  an  elastic  circulation  and  as  the  ultimate 
means  of  settlement  of  international  balances,  it  will 
continue  to  dominate  the  world.  It  will  not  be  de- 
throned for  the  reason,  if  for  no  other,  that  such  a  step 
could  only  be  taken  by  mutual  agreement  between  gold 
debtor  and  gold  creditor. 

The  position  of  economic  superiority  held  by  a  credi- 
tor country  owning  a  large  stock  of  gold  is,  however, 
of  so  immense  an  advantage  that  it  will  not  be  volun- 
tarily relinquished  by  the  large  number  of  nations 
that  are  the  "bead  possidentes." 

Nor  do  I  believe  that  the  world  has  turned  far  enough 
into  a  family  of  communists  seriously  to  consider  the 
pooling  by  all  countries  of  their  holdings  of  gold.  As 
long  as  nations  have  separate  national  budgets  and 
obligations,  they  are  likely  to  wish  to  retain  a  distinct 
ownership  of  their  assets.  The  problems  of  recon- 


118  .'Reconstructing  America 

struction  are  immense  and  immediate ;  the  new  structure 
must  be  erected  on  the  most  solid  foundation  and  built 
with  material  that  is  thoroughly  tested  and  promptly 
and  actually  available. 

IS   THE   UNITED   STATES  TO  LEAD  FINANCIALLY? 

In  thinking  of  financial  reconstruction  and  of  the 
financial  world  of  the  future,  do  not  too  many  amongst 
us  have  this  one  thought  uppermost  in  their  minds :  is 
the  United  States  hereafter  going  to  be  the  leading 
financial  country?  In  other  words,  are  we  going  to 
take  England's  place  as  the  foremost  financial  power? 

The  whole  truth  of  the  matter  is,  that  we  have  both 
grown  to  be  pillars  supporting  the  same  structure  and 
that  neither  can  fall  or  become  weakened  without 
bringing  danger  or  disaster  on  the  other.  England, 
herself  the  owner  of  billions  of  foreign  obligations, 
will  remain  the  banking  center  of  Europe;  a  world 
clearing  house. 

If  I  read  aright  the  signs  of  the  times,  England  and 
the  United  States,  soon  to  be  joined  by  France,  allies 
of  the  past,  will  be  partners  rather  than  competitors 
in  the  future  —  partners  not  of  a  close  corporation  to 
the  exclusion  of  others,  it  will  be  a  partnership  wide 
open  for  any  respectable  new  associate  wishing  to  enter. 
Or  perhaps  we  might  more  properly  term  them  joint 
trustees,  with  others,  administering  a  great  public 
trust. 

PERIL  IN   GOVERNMENT   OWNERSHIP 

The  war  has  accentuated  and  vastly  accelerated  the 
growth  of  Government  responsibility  and  influence 


Constructive  Finance  119 

in  business.  This  development  is  world-wide  at  this 
time,  it  is  natural,  logical,  and  inevitable.  While  it 
will  tend  to  elevate  business,  there  is  danger  that  unless 
carefully  safeguarded  in  both  form  and  scope,  it  may 
tend  to  corrupt  and  to  debauch  Government.  It  is 
this  peril  that  we  are  facing  at  the  moment  of  our  proud- 
est triumph,  and  it  must  be  our  serious  concern  that  a 
national  effort  born  in  idealism  should  not  bear  the 
seeds  of  ultimate  national  decline.  The  reconstruction 
period  places  us  face  to  face  with  this  problem  and  it  is 
during  this  period  that  thoughts  will  have  to  be  developed 
leading  to  a  solution  entirely  fair  to  the  people. 

II 

THE  DECLINE  IN  VALUE  OF  GOLD  :  AMERICA'S  OPPOR- 
TUNITY FOR  BANKING  LEADERSHIP 

BY  A.  C.   MILLER 

Member  Federal  Reserve  Board 

During  the  past  four  years  gold  has  sustained  a  most 
serious  fall  of  value.  Tested  by  price  levels  in  leading 
markets,  it  has  lost  about  one  half  of  its  purchasing 
power  since  the  beginning  of  the  European  war. 

So  serious  a  decline  in  the  value  of  the  standard 
is  naturally  calculated  to  awaken  concern.  Unless 
the  decline  is  to  be  treated  as  a  transitory  phenomenon, 
there  would  be  reasonable  ground  for  dissatisfaction 
with  the  continued  use  of  the  gold  standard.  Such 
dissatisfaction  was  voiced  even  before  1914,  because 
of  the  instability  that  was  exhibited  by  the  gold  stand- 
ard. It  is  not  surprising,  therefore,  that,  in  view  of 
the  spectacular  decline  of  the  past  four  years,  question 


120  Reconstructing  America 

should  have  been  raised  as  to  the  desirability  of  the 
gold  standard,  at  any  rate,  unless  some  method  of  pro- 
viding compensation  against  its  fluctuations  should  be 
made  a  part  of  it.  Looked  at  from  this  point  of  view, 
the  immediate  problem  presented  by  the  gold  standard 
is  that  of  restoring  its  lost  value  and  insuring  the  sta- 
bility of  that  value. 

RADICAL  PROPOSALS 

But  this  is  not  the  only  anxiety  that  has  been  occa- 
sioned by  the  peculiar  behavior  of  gold.  Fear  has  often- 
times been  expressed  that  the  vast  financial  and  credit 
structure  that  has  been  built  up  on  the  gold  basis  during 
the  last  four  years  is  insecure  because  of  an  inadequate 
gold  reserve,  a  condition  which  it  is  said  threatens  to 
become  worse  with  diminishing  production  of  gold. 
The  gold  standard,  it  is  said,  has  been  put  in  jeopardy 
because  of  the  insufficient  supply  of  gold,  and  heroic 
measures  must  therefore,  it  is  said,  be  taken  to  stimulate 
the  production  of  gold.  The  particular  measures  sug- 
gested for  this  purpose  are  the  exemption  of  gold  mining 
from  taxation,  the  granting  of  bounties  to  gold  producers, 
and  as  a  much  more  radical  proceeding,  the  diminution 
of  the  gold  content  of  coins. 

Gold  has  fallen  in  its  purchasing  power  because  it 
has  shared  the  fate  of  paper  from  rising  prices.  Prices 
at  wholesale  are  up  about  100  per  cent  or  more  in  lead- 
ing markets  in  countries  where  the  gold  standard  still 
obtains. 

Why  are  prices  up,  and  arc  they  destined  to  stay  up? 
These  are  obviously  questions  that  must  be  answered  in 
undertaking  to  estimate  the  prospect  of  gold. 


Constructive  Finance  121 

FACTORS   IN  HIGH  PRICES 

Not  until  much  patient  and  exhaustive  investigation 
has  been  made  can  it  be  determined  with  anything  like 
satisfactory  accuracy  to  what  extent  the  great  rise  of 
prices  which  has  taken  place  in  the  last  four  years  is 
to  be  explained  by  relative  shortage  of  leading  materials 
and  commodities,  and  to  what  extent  it  is  due  to  the 
artificial  abundance  of  money.  No  doubt  both  factors 
have  been  at  work,  and  the  high  prices  which  have 
prevailed  are  partly  to  be  regarded  as  indicating  "scar- 
city values"  and  partly  as  indicating  inflated  prices. 
The  scarcity  prices  will,  no  doubt,  correct  themselves 
and  disappear  as  industry  returns  to  a  normal  condi- 
tion. Inflated  prices,  however,  present  a  more  difficult 
position.  Their  corrective  must  be  sought  mainly 
in  a  diminution  in  the  volume  of  purchasing  power, 
and  must  come  in  the  United  States  mainly  in  the 
liquidation  of  war  business  and  war  borrowings. 

The  expansion  of  circulating  bank  deposit  credit  in 
the  United  States  during  the  last  four  years  may  be  con- 
servatively estimated  at  from  40  to  50  per  cent.  The 
amount  of  securities  issued  by  the  government  in  the 
process  of  negotiating  the  great  war  loans  —  in  the 
form  of  bonds  and  certificates  of  indebtedness  —  which 
there  is  good  reason  for  believing  have  not  yet  been 
absorbed  by  permanent  investment,  may  be  estimated 
at  between  $5,000,000,000  and  $6,000,000,000. 

INFLATION   DUE    TO   WAR   FINANCE 

A  considerable  part  of  our  expanded  credit  and  cur- 
rency structure  is  therefore  undoubtedly  to  be  accounted 


Reconstructing  America 


for  by  the  large  volume  of  war  securities  being  carried 
by  or  in  the  banks.  It  is  the  considerable  addition  to 
the  volume  of  our  currency  and  circulating  bank  credit 
thus  occasioned  that  explains  much  of  the  rise  of  prices 
that  we  have  been  experiencing. 

In  the  United  States  prices  are  gold  prices,  all  of  our 
paper  currency  being  interchangeable  with  gold,  and 
therefore  at  a  parity  with  gold.  In  part,  gold  prices 
have  risen  because  of  the  abundance  of  gold,  our  stock 
having  been  increased  by  more  than  $1,000,000,000 
since  1914.  But  it  is  not  the  direct  but  the  indirect 
effect  of  this  gold  that  has  sustained  the  upward  flight 
of  prices.  It  is  the  great  volume  of  circulating  credit 
and  currency  based  upon  it  that  has  put  or  kept  prices 
up. 

Are  prices  to  be  kept  up,  can  they  be  kept  up,  and 
will  they  be  kept  up? 

The  fate  of  gold  and  the  gold  standard  will  depend 
mainly  upon  the  answers  given  to  these  questions.  More 
than  this,  the  character  of  the  whole  post-war  period 
and  the  nature  and  length  of  the  readjustments  which 
it  is  admitted  must  be  worked  out  will  depend  upon 
these  answers. 

DEFLATION   MUST   PRECEDE   LOWER   PRICES 

Gold  will  not  recover  its  lost  purchasing  power  until 
prices  decline. 

The  only  reason  for  doubting  whether  the  existing 
gold  stock  of  the  leading  Western  countries  is  sufficient 
to  hold  out  the  expectation  that  the  monetary  practices 
associated  with  an  effective  gold  standard  can  soon  be 
resumed  is  the  doubt  as  to  what  the  attitude  of  the 


Constructive  Finance  123 

leading  countries  of  the  commercial  world  will  be  toward 
a  continuance  of  the  present  inflated  price  structure. 
The  whole  commercial  world  is  on  an  inflated  basis. 
The  situation  is  worse  in  some  countries  than  in  others. 
In  some  the  inflation  is  a  gold  inflation,  in  others  it  is  a 
paper  inflation ;  but  in  all  a  situation  has  been  produced, 
either  by  reason  of  the  abundance  of  gold  or  the  abun- 
dance of  paper  and  credit  currency,  that  calls  for  much 
the  same  sort  of  general  treatment,  unless  the  present 
inflated  level  of  prices  is  to  be  continued  by  acquiescence 
of  the  leading  countries. 

GOLD  PROBLEM  IS  INTERNATIONAL 

The  problem  is,  therefore,  an  international  or  world 
problem,  and  the  same  may  be  said  of  the  problem  of 
gold.  Gold  will  not  recover  its  lost  value  until  the 
present  inflated  prices  disappear.  Action  by  any  one 
country,  however,  in  proceeding  to  rectify  its  price 
situation  would  probably  do  much  to  focus  international 
attention  on  the  problem  and  to  suggest  the  advisability 
of  taking  similar  action.  .  .  . 

SUPPLY   ADEQUATE   FOR   RESERVE   NEEDS 

Much  as  I  believe  that  the  permanent  economic 
interest  of  the  United  States  and  of  the  nations  with 
which  we  have  been  associated  require  that  the  inflation- 
ism produced  by  the  war  should  be  cured  by  a  diminu- 
tion of  banking  liabilities,  I  still  believe  that  the  supply 
of  gold  possessed  and  controlled  by  them  is  large  enough 
to  supply  a  banking  reserve  adequate  to  maintain 
an  effective  gold  standard,  if  the  supply  be  redistributed, 
and  providing  some  of  the  monetary  practices  begun 


124  Reconstructing  America 

during  the  war,  which  have  resulted  in  a  great  economy 
in  the  use  of  gold,  be  continued  and  the  light  thrown 
by  the  experience  of  the  war  upon  the  ability  of  a  given 
unit  of  metallic  reserve  to  sustain  a  much  larger  volume 
of  credit  than  was  assumed  in  pre-war  days  may  be 
taken  as  a  guide  in  the  future. 

Following  the  classic  example  of  England,  the  gold 
standard  countries  pretty  generally  pursued  the  policy 
of  maintaining  a  considerable  volume  of  gold  coin  in 
actual  circulation.  "No  gold  standard  without  a  gold 
currency"  represented  the  orthodox  view.  During 
the  war  the  policy  of  concentrating  the  gold  scattered 
in  the  channels  of  circulation  and  the  pockets  of  the 
people  into  great  reserve  institutions  has  been  system- 
atically followed,  with  the  results  that  are  reflected  in 
the  vast  increase  in  the  gold  holdings  of  our  Federal 
Reserve  banks  and  many  of  the  central  banks  in  other 
countries  at  a  rate  far  in  excess  of  the  annual  output 
of  gold  from  the  mines. 

VAST   INCREASE   IN   BANK  HOLDINGS 

Gold  holdings  of  the  world's  fifteen  principal  banks 
of  issue  increased  from  $3,646,000,000  in  July,  1914,  to 
$6,258,000,000  in  November,  1918,  a  gain  of  $2,600,- 
000,000,  or  more  than  $800,000,000  in  excess  of  the 
total  new  gold  taken  from  the  mines  during  this  period. 
It  does  not  seem  probable  that  for  many  years  to  come, 
if  ever,  there  will  be  a  return  to  the  old  practice  of 
maintaining  a  large  body  of  gold  in  circulation.  The 
gold  which  has  been  concentrated  in  the  great  reserve 
and  note-issuing  banks  is  likely  to  be  kept  there.  The 
gold  standard  will  henceforth  be  disassociated  from  a, 


Constructive  Finance  125 

widespread  use  of  gold  in  circulation.  The  problem 
of  maintaining  an  effective  gold  standard,  therefore, 
becomes  more  than  ever  a  problem  of  banking,  and  espe- 
cially one  of  the  management  of  the  reserve.  .  .  . 

FUNCTIONS  OF  GOLD  RESERVE 

The  contingencies  against  which  a  banking  reserve 
of  gold  was  required  in  pre-war  times  may  be  set  down 
as  three : 

(1)  To   maintain  the  parity  of   internal   circulation 
with  gold  by  freely  providing  gold  to  meet  a  foreign 
drain ; 

(2)  The  psychological  function  of  inspiring  confidence 
in   the   strength,  stability,   and   safety  of   a   country's 
financial  and  credit  system  ;  and 

(3)  To  provide  a  store  of  purchasing  power  for  use 
in  times  of  national  emergency,  such  as  war. 

Of  these  functions  the  first  is  by  far  the  most  impor- 
tant from  a  banking  and  economic  standpoint.  It  must 
be  mainly  by  its  ability  to  provide  gold  for  meeting  and 
thereby  correcting  an  adverse  balance  of  trade  that  the 
adequacy  of  the  banking  reserve  carried  in  any  country 
of  centralized  reserves  must  be  tested.  It  is,  of  course, 
through  the  medium  of  changes  in  the  amount  of  its 
banking  reserve  —  flowing  out  and  diminishing  when 
the  balance  is  adverse,  flowing  in  and  increasing  when 
the  balance  is  favorable  —  that  the  general  price  level 
in  gold  standard  countries  is  kept  in  proper  relation  to 
the  world  level  of  gold  prices  —  prices  falling  as  an 
adverse  balance  is  in  process  of  correction  through  an 
outflow  of  gold  and  rising  as  a  favorable  balance  is 
in  process  through  an  inflow. 


126  Reconstructing  America 

Looking  at  the  matter  of  reserves  from  the  point  of 
view  of  the  price  level  and  of  the  adjustment  of  the  vol- 
ume of  a  country's  credit  and  banking  currency  to 
what  is  necessary  to  maintain  prices  at  their  proper 
economic  level,  this  may  be  described  as  the  most 
important  economic  function  of  a  nation's  banking 
reserve.  The  gold  of  the  world  and  the  new  gold 
as  it  comes  from  the  mines  is  constantly  in  process 
of  distribution  and  redistribution.  It  is  thus  that  the 
international  price  level  is  maintained  or  restored  in 
accordance  with  the  underlying  conditions  governing 
the  equation  of  international  demand  and  supply  of  the 
different  countries.  As  such  the  gold  reserve  is  an 
economic  regulator  of  the  first  importance.  It  is  a 
method  of  testing  the  character  and  volume  of  a  coun- 
try's credit  and  currency,  and  so  keeping  it  from  getting 
out  of  line  with  its  economic  requirements,  particularly 
in  relation  to  world  conditions. 

MODERATE    SUPPLY   A   BETTER   REGULATOR 

As  regards  this  function  of  a  regulator,  it  seems  obvious 
that  it  is  not  the  absolute  level  of  the  reserve  ratio  that 
is  significant,  but  the  variations  in  it  which  take  place. 
The  decline  of  an  absolutely  low  reserve  ratio  will  serve 
just  as  well  to  indicate  an  undue  growth  of  banking 
liabilities  as  the  decline  of  a  higher  one.  Indeed,  there 
is  much  warrant,  especially  in  view  of  recent  war  experi- 
ences, to  justify  the  opinion  that  a  reserve  of  moderate 
height  is  a. more  sensitive  indicator  and  therefore  a 
better  regulator  of  banking  operations,  than  one  of 
greater  height. 


Constructive  Finance  127 

VALUE   OF  CONCENTRATION 

With  respect  to  the  function  of  providing  gold  to  meet 
foreign  demands,  it  is  the  absolute  quantity  of  gold 
held  under  banking  control,  rather  than  the  reserve 
ratio,  that  counts.  The  concentration,  therefore,  of 
the  bulk  of  the  stock  of  monetary  gold  in  all  the  lead- 
ing countries  under  banking  control  means  a  great 
extension  of  the  facilities  for  the  international  mobiliza- 
tion of  gold  —  the  loss  of  a  given  amount  from  a  large 
reservoir  of  gold  bulking  as  a  lesser  loss  than  from  a 
smaller  reserve,  even  though  the  reserve  ratio  in  the 
latter  case  was  in  first  instance  higher  than  in  the  former. 
The  gold  strength,  for  example,  of  the  Federal  Reserve 
System  internationally  considered  is  to  be  found  in  our 
holdings  of  more  than  $2,000,000,000  quite  irrespective 
of  what  the  reserve  percentage  of  the  system  as  a  whole 
might  be.  The  loss  of  what  in  pre-war  days  would 
have  been  considered  a  very  serious  drain  can  now  be 
faced  with  equanimity. 

With  respect  to  the  national  emergency  function  of 
the  reserve  —  that  is,  making  provision  by  the  accumu- 
lation of  something  like  a  national  hoard  against  the 
vague  contingencies  of  international  politics  —  much 
will  depend  in  the  future  upon  the  basis  on  which  the 
affairs  of  the  world  are  to  be  reordered  as  a  result  of 
the  peace  settlement.  If  the  league  of  nations,  the  re- 
duction of  armaments,  and  the  like  become  realities, 
then  the  accumulation  of  hoards  of  gold  under  the  im- 
pulse of  national  fears  or  ambitions  must  be  suffered 
to  go  the  way  of  other  outworn  practices.  Thus  will 
the  functions  of  banking  reserves  be  reduced  more  nearly 


128  Reconstructing  America 

to  the  purely  economic  requirements,  and  reserves 
which  have  been  thought  to  be  inadequate  be  quite 
adequate. 

THE   FACTOR   OF  CONFIDENCE 

As  regards  the  vague  function  of  inspiring  public 
confidence,  the  matter  is  mainly  one  of  psychology. 
A  reserve  is  adequate  if  it  is  thought  to  be  adequate. 
The  events  of  the  last  four  years  have  thrown  the  matter 
of  the  importance  of  a  banking  reserve  from  the  psycho- 
logical standpoint  into  a  diminishing  perspective.  Not 
the  least  of  the  remarkable  financial  by-products  of 
the  war  has  been  the  ease  with  which  popular  expecta- 
tions, confidence,  and  practices  have  adjusted  themselves 
to  the  substitution  of  fiduciary  notes  for  gold  cur- 
rency. .  .  . 

OUR   CHANCE   FOR   LEADERSHIP 

The  United  States  is  in  an  exceptional  position  for 
taking  the  initiative  in  revising  banking  practices 
along  more  economical  and  rational  lines : 

(1)  Because  of  our  assured  creditor  position. 

(2)  Because  of  our  unprecedented  gold  position. 

(3)  Because    of    our    great    banking    and    financial 
strength. 

We  are  a  creditor  nation  to  the  extent,  if  not  at  the 
moment,  of  no  distant  time  in  the  future,  of  $500,000,000 
a  year.  We  have  increased  our  stock  of  gold  since  the 
beginning  of  the  European  war  by  fully  50  per  cent. 
At  the  same  time,  by  the  Federal  Reserve  Act,  we  have 
reorganized  our  banking  reserve  in  such  a  way  as  greatly 
to  economize  its  use,  making  our  banking  position  as  a 


Constructive  Finance  129 

whole  one  of  far  greater  strength  and  safety  than  ever 
before.  More  than  $2,000,000,000  of  gold  concen- 
trated in  the  hands  of  the  Federal  Reserve  banks  consti- 
tutes the  greatest  gold  reservoir  the  world  has  ever 
known. 

We  are,  therefore,  in  a  matchless  position  to  assume 
the  function  of  a  free  gold  market,  a  function  which 
the  world  in  the  process  of  economic  readjustment  and 
recovery  will  sorely  need.  There  must  somewhere  be 
a  market  in  which  claims  can  be  cashed  in  gold  with  a 
certainty  that  gold  will  be  forthcoming  for  foreign 
shipment.  Whatever  might  be  said  in  justification  of 
the  embargo  on  gold  shipments,  which  the  United  States, 
in  common  with  the  other  belligerent  nations,  have  prac- 
ticed as  a  matter  of  admitted  military  necessity,  the 
embargo  should  be  lifted  at  the  earliest  practicable 
moment. 

We  must  deal  with  our  great  gold  stock  in  a  spirit 
of  liberality.  We  have  far  more  gold  than  we  need  to 
do  our  money  and  banking  work.  The  surplus  was 
obtained  from  other  countries  largely  because  of  their 
necessities.  They  need  it  back  in  order  to  effect  the 
restoration  of  their  finances,  more  particularly  to  insure 
the  resumption  and  maintenance  of  gold  payments. 
We  should  not  hesitate  to  part  with  much  of  it  if  we 
could  have  the  assurance  that  the  countries  receiving 
it  would  proceed  to  lift  their  embargoes  and  restrictions 
and  deal  in  the  future  with  gold  in  the  spirit  of  the  new 
international  reciprocity  which  is  expected  to  be  one 
of  the  consequences  of  the  war. 


130  Reconstructing  America 

ill 

VAST    FOREIGN    INDEBTEDNESS    TO    AMERICA  —  How 
CAN  IT  BE  LIQUIDATED? 

BY  THOMAS  W.  LAMONT 
Of  J.  P.  Morgan  £r  Co. 

Formerly  America  was  the  largest  debtor  nation  of 
the  world.  Now  in  a  brief  space  of  a  little  over  four 
years  its  position  has  been  reversed  and,  next  to  Great 
Britain,  it  has  taken  its  place  as  the  greatest  credit 
nation  of  the  globe.  Before  the  war,  America's  indebted- 
ness abroad  was,  according  to  the  best  data  obtainable, 
approximately  $4,000,000,000.  Within  a  year  after 
the  Great  War  began,  America  began  to  buy  back  her 
foreign-held  securities,  and,  as  I  figure  it  to-day,  she 
has  repurchased  about  three  fourths  of  the  total.  This 
would  leave  outstanding  abroad  American  securities 
of  all  kinds  to  the  value  of  about  $1,000,000,000, 
and  the  interest  due  from  America  on  this  sum  is,  say, 
$50,000,000  per  annum. 

Now  let  us  look  on  the  other  side  of  the  picture :  Pri- 
vate investors  in  America  have  loaned  to  the  foreign 
governments  approximately  $2,000,000,000,  still  out- 
standing. They  may  have  loaned  to  private  corporations 
and  in  other  ways  $500,000,000,  additional.  The  United 
States  Government  has  loaned  a  total  which  will  prob- 
ably soon  reach  $8,500,000,000.  This  means  an  indebt- 
edness of  all  kinds  of  $11,000,000,000,  owed  from  out- 
side this  country  to  the  Government  and  people  of 
the  United  States;  with  only  $1,000,000,000  on  the 
other  side  of  the  ledger,  or  a  net  indebtedness  to  the 


Constructive  Finance  131 

United  States  of  $10,000,000,000.  The  annual  inter- 
est on  such  an  indebtedness  will  amount  to  at  least 
$500,000,000. 

Bear  that  figure  in  mind  for  a  moment,  and  then  turn 
to  the  trade  end  of  the  picture.  Prior  to  the  war  the 
annual  merchandise  trade  balance  in  America's  favor 
averaged,  over  a  series  of  years,  somewhat  less  than 
$500,000,000;  but  this  trade  balance  was  almost,  if 
not  completely,  offset  by  the  invisible  balance  made 
up  of  interest  which  we  owed  abroad  on  American  securi- 
ties, of  freights  for  transporting  our  goods  in  foreign 
bottoms,  of  money  spent  by  tourists,  of  insurance 
in  foreign  companies,  etc. 

With  the  tremendous  food  supplies  that  Europe  will 
still  need  from  us,  and  the  great  mass  of  materials  for 
reconstruction,  etc.,  it  is  probable  that  in  the  future 
the  merchandise  trade  balance  in  our  favor  will  amount 
to  at  least  $1,000,000,000  per  annum.  Furthermore, 
the  invisible  trade  balance  that  I  have  just  described 
will,  with  the  construction  of  our  own  merchant  marine, 
largely  disappear.  In  other  words,  after  the  declara- 
tion of  peace,  I  should  look  to  see  foreign  countries  owing 
America  each  year  $1,000,000,000  on  actual  trading 
account.  Add  to  that  the  $500,000,000  interest  on 
foreign  indebtedness,  not  to  mention  payments  on 
account  of  principal,  and  we  shall  see  a  staggering  total 
of  $1,500,000,000  owed  and  payable  to  America  every 
year.  How  long  will  such  a  balance  continue  to  accrue  ? 
No  one  can  say,  but  it  would  not  be  surprising  if  the 
period  should  exceed  three  years. 


132  Reconstructing  America 

METHODS   OF  REPAYMENTS 

How  is  such  an  enormous,  annual  indebtedness  to 
America  to  be  settled?  When  you  ask  the  question, 
you  answer  it.  There  is  no  possible  way,  except  through 
the  continued  and  heavy  investment  by  America  in 
foreign  obligations,  both  public  and  private.  Such 
obligations  must,  it  goes  without  saying,  be  sound. 
They  will  be  sound.  They  can  be  made  to  be  sound, 
safe,  and  conservative.  But  there  is  no  dodging  the 
issue  that  if  the  world  is  to  move  on ;  if  its  peoples  are 
to  be  housed  and  fed  and  clothed ;  if  rich  America  is 
to  do  her  full  share  in  rendering  these  services,  —  then 
we  shall  have  to  lend  to,  and  in,  foreign  countries  on  a 
scale  that,  five  years  ago,  we  had  never  even  conceived 
possible. 

IV 

MUST  THE  WAR-STRICKEN  NATIONS  PAY  THEIR  DEBTS 

TO  Us  ?  — •  How  ? 

BY  GEORGE   E.   ROBERTS 
National  City  Bank,  New  York 

If  we  are  going  to  have  balances  in  our  favor  in  every 
important  relation  with  other  countries,  how  are  they 
going  to  make  payment?  There  is  only  one  possible 
way  in  which  it  can  be  done.  We  will  have  to  capitalize 
our  balances  and  convert  them  into  foreign  investments. 
We  are  out  in  the  world  to  stay,  for  we  never  can  get 
our  belongings  home.  .  .  . 

There  is  a  natural  equilibrium  in  economic  affairs 
which  in  the  long  run  is  bound  to  be  maintained.  There 


Constructive  Finance  133 

is  an  altruism  in  the  economic  law  which  prevents  an 
individual  or  a  nation  from  absorbing  wealth  without 
limit.  An  individual  whose  investments  have  reached 
the  point  where  the  income  more  than  suffices  for  his 
own  wants,  goes  on  accumulating  and  reinvesting  his 
surplus,  although  the  gains  no  longer  contribute  any- 
thing to  his  personal  needs  or  comfort.  It  is  reserve 
wealth  or  surplus  wealth  to  him.  Nominally  and  law- 
fully it  belongs  to  him ;  he  controls  it ;  but,  actually, 
it  is  in  the  service  of  the  public. 

And  so  it  is  advantageous  for  a  country  whose  stock 
of  wealth  is  proportionately  greater  than  that  of  the 
rest  of  the  world  to  grant  aid  to  other  countries  less 
advanced  or  temporarily  short  of  working  capital.  In 
our  economic  relations  our  obligations  coincide  with 
our  largest  and  best  interests.  There  is  an  obligation 
upon  us  to  assist  in  restoring  industrial  order  in  the 
devastated  regions  of  Europe,  to  put  these  people  back 
into  homes  and  workshops,  to  supply  them  with  the 
means  to  become  self-supporting  and  prosperous  again, 
and  it  is  to  our  interest  to  do  it  because  it  will  give 
employment  to  our  own  industries.  Our  own  interests 
will  be  best  served  by  allowing  our  income  from  the 
foreign  loans  to  remain  in  the  possession  and  service 
of  our  debtors.  Neither  the  principal  nor  the  interest 
will  ever  be  wrung  from  distressed  peoples.  When 
the  payments  are  made,  it  will  be  done  by  the  natural 
readjustments  in  international  affairs,  and  by  that  time 
the  productive  powers  of  all  countries  will  have  so 
increased  that  no  burden  will  be  felt. 


134  Reconstructing  America 

ADVANTAGE  OF  LETTING  OUR  CAPITAL  REMAIN  ABROAD 

I  would  like  to  emphasize,  in  this  connection,  what 
to  me  is  a  most  suggestive  feature  of  this  international 
situation.  We  are,  I  repeat,  under  constraint  by  our 
interests  to  allow  both  principal  and  accruing  interest 
to  remain  in  the  debtor  countries.  Think  of  just  what 
that  means :  it  means  that  this  capital,  instead  of  being 
passed  over  to  us,  will  remain  in  use  in  these  debtor 
countries.  It  will  be  used  to  finance  their  business,  to 
enlarge  their  industries  and  give  employment  to  their 
people.  It  will  contribute  to  the  strength  of  their  banks, 
it  will  build  up  their  foreign  trade,  and  if  we  want  to 
take  the  narrow  view  of  it,  we  may  say  that  this  capital 
of  ours  in  their  hands  will  help  to  strengthen  them  as 
competitors  of  ours  in  world  affairs.  And  yet  it  will 
be  to  our  advantage  to  do  it.  We  will  suffer  if  we 
fail  to  do  it.  In  order  to  serve  our  own  interests  we 
must  serve  the  common  interests,  and  that  principle 
holds  throughout  the  business  world.  That  Europe 
shall  not  pay  her  debts  to  us  under  present  conditions 
is  fixed  in  the  very  constitution  of  things,  in  the  frame- 
work of  economic  relations.  I  doubt  if  she  ever  does 
pay  in  the  sense  of  sending  goods  or  gold  to  this  country. 
Not  if  we  remain  a  creditor  nation.  We  will  have 
interests  over  there,  we  will  have  paper  certificates 
of  obligation  or  perhaps  of  ownership  in  properties 
over  there ;  but  if  we  continue  to  take  interest  or  divi- 
dends in  the  form  of  new  certificates  we  will  withdraw 
nothing.  A  creditor  nation,  increasing  in  wealth,  is 
always  adding  to  the  holdings  of  its  tin  boxes.  What 
difference  does  it  make  to  the  debtor  nations  so  long 


Constructive  Finance  135 

as  they  have  all  the  property  and  all  the  increment 
from  the  property  ? 

FOLLY   OF  BOLSHEVISM 

The  spirit  which  finds  its  blind  expression  in  Bolshe- 
vism has  its  inception  in  the  desire  for  better  living  condi- 
tions, and  it  is  an  affront  to  that  spirit  —  and  an  affront 
to  common  sense  —  to  conduct  the  international  policies 
of  nations  upon  the  theory  that  the  chief  danger  to  be 
averted  is  that  of  overproduction.  Such  an  argument 
amounts  to  a  confession  of  ineffectiveness  or  non-achieve- 
ment in  the  industrial  management  of  the  world,  and 
affords  a  basis  for  challenging  the  existing  order. 

But  it  is  one  thing  to  be  critical  and  another  thing 
to  be  constructive,  and  the  critics  of  the  existing  order, 
where  they  get  a  chance,  display  a  greater  incom- 
petency.  The  condition  of  the  masses  will  never  be 
improved  by  paralyzing  industry  in  efforts  to  divide 
the  existing  stock  of  wealth.  The  existing  stock  in 
itself  is  of  small  importance;  it  is  the  constant  and 
efficient  employment  of  all  the  agencies  of  production, 
and  the  regular  and  increasing  flow  of  goods  to  the 
market,  which  concerns  the  public.  The  problem  of 
society  everywhere  is  to  organize  more  effectively  — 
to  coordinate,  integrate,  and  balance  —  production  in  all 
branches  to  obtain  the  greatest  possible  output  of  the 
things  which  minister  to  the  common  comfort  and 
welfare,  and  to  secure  by  exchange  of  products  and 
services  their  widespread  distribution  and  consumption. 
This  is  the  great  appeal  to  the  enlightened  and  con- 
structive forces  of  the  world. 


136  Reconstructing  America 

V 

BUSINESS  OUTLOOK,  LABOR  PROBLEM  AND  MOTOR-CAR 
INDUSTRY 

BY  JOHN  NORTH  WILLYS 

I  am  naturally  an  optimist  in  all  business  affairs, 
and  take  a  broad  view,  and  in  a  favorable  light,  of  the 
necessary  readjustments  which  must  take  place  to 
put  our  nation  back  on  a  peace  basis  after  being  fully 
aligned  for  war. 

In  my  opinion  the  effect  of  the  war  upon  the  economic, 
social,  political,  moral,  and  spiritual  ideals  of  the  United 
States  will  be  to  strengthen  and  more  closely  tie  together 
all  those  ideals  which  make  for  advancement  along  staple, 
healthy  avenues,  —  because  deprivation  through  war 
has  always  in  the  past  reflected  in  victory  a  determina- 
tion of  the  people  to  look  deeper  and  more  closely  towards 
right  conduct  of  business  and  spiritual  uplift. 

By  the  war  in  a  material  sense  we  demonstrated  that 
with  our  great  manufacturing  resources  we  are  able 
to  almost  take  care  of  the  demands  of  the  world,  and, 
thereby,  our  international  prestige  has  been  won  and  our 
reputation  established. 

CAPITAL   AND   LABOR 

The  labor  problem  will  probably  require  more  serious 
readjustment  than  any  other,  because  of  the  millions 
of  men  that  have  been  taken  from  the  factories,  work- 
shops, office,  farm,  etc.,  which  must  be  provided  for 
in  the  near  future,  and  I  would  not  care  to  venture  an 
opinion  as  to  how  it  may  be  solved,  but  I  believe  a  way 


Constructive  Finance  137 

will  be  found  by  joint  cooperation  to  handle  this  problem 
successfully. 

Development  of  better  relations  between  capital 
and  labor  will  depend  on  the  fairness  of  both  to  meet 
the  new  conditions  brought  about  by  the  war.  Natu- 
rally unfair  demands  by  both  will  create  an  unsatis- 
factory business  condition.  Should  a  crisis  arise  I 
believe  a  probable  solution  of  any  difficulty  would  be 
joint  meetings  between  duly  accredited  representatives 
of  both  factions  to  decide  pro  and  con  all  the  points 
that  may  be  presented,  and  that  decision  to  govern. 

As  to  how  labor  can  be  persuaded  to  show  a  more 
fraternal  spirit  —  to  my  mind  the  most  successful  way 
of  accomplishing  this  would  be  by  more  humane  and  just 
treatment  of  the  men  employed,  and  thus  assuring 
them  that  their  interests  are  the  interests  of  capital, 
because  it  is  well  known  that  one  cannot  succeed  with- 
out the  other,  and  both  sides  must  realize  a  more  closely 
allied  spirit  of  brotherhood. 

A   REAWAKENING   OF   BUSINESS 

Foreign  markets  will  require  the  close  attention  of 
American  manufacturers.  The  countries  on  the  other 
side  of  the  sea  which  have  been  at  war  are  now  thor- 
oughly depleted  in  a  manufacturing  sense,  and  for  some 
time  to  come  there  will  be  a  great  demand  for  Ameri- 
can goods,  and  by  helping  those  countries  rebuild  and 
reestablish  themselves  as  business  competitors  we  will, 
at  the  same  time,  increase  the  demand  for  our  goods 
and  place  ourselves  more  strongly  in  the  field  as  friendly 
competitors  with  their  own  markets. 

The  coming  of  peace  and  the  readjustment  of  business, 


138  Reconstructing  America 

with  increased  earnings,  will  naturally  enhance  the 
value  of  securities  of  a  commercial  character.  Real 
estate  values  should  not  deteriorate  and  I  firmly 
look  for  a  reawakening  in  that  line  of  business  which 
will  be  healthy  and  permanent.  Prices  of  commodi- 
ties will  naturally  depend  on  the  labor  and  material 
markets. 

I  anticipate  a  recovery  in  business  at  an  early  date, 
and,  while  it  may  be  somewhat  slow  in  coming  into  its 
own,  I  cannot  see  any  panicky  conditions  presenting 
themselves  at  this  time. 

RECONSTRUCTION  IN  MOTOR-CAR  INDUSTRY 

The  situation  which  confronted  the  industry  in  Febru- 
ary, 1918,  was  an  exceedingly  grave  one.  This  year  the 
issue  we  face  is  even  more  important  to  the  industry 
and  to  the  world.  For  in  the  period  of  peace  and  recon- 
struction the  automobile  must  play  a  gigantic  part.  *-l 

Fundamentally,  the  automobile  is  simply  a  unit  of 
rapid  personal  transportation.  That  is  the  real  reason 
for  its  marvelous  development.  Every  man  and  woman 
whose  time  was  filled  with  intensified  duties  occasioned 
by  the  war  appreciates  the  utility  role  of  the  automobile 
as  never  before.  It  may  be  that  before  the  year  past, 
automobile  owners  were  not  fully  conscious  of  its  indis- 
pensable utility.  But  to-day  the  world  knows  the 
epochal  story  of  its  accomplishments  at  home  and 
abroad. 

MOTOR   VEHICLES   SAVED   FRANCE 

It  is  a  matter  of  common  knowledge  now  that  the 
automobiles  and  motor  buses  which  composed  Galliani's 


Constructive  Finance  139 

gallant  force  saved  France.  We  are  told  that  a  second 
time  automobiles  were  the  deciding  factor  at  the  battle 
of  Verdun.  We  have  had  striking  evidence  of  their 
efficacy  in  helping  to  win  many  victories  for  the  supply 
army  here  at  home.  We  have  seen  our  neighbors 
and  friends  helping  in  motor  cars  with  Red  Cross  work 
and  aiding  in  the  flotation  of  billions  of  dollars  in 
the  campaigns  for  Liberty  Loans  and  War  Savings 
Stamps. 

The  automobile  has  made  two  hours  grow  where 
only  one  existed  before. 

The  automobile  industry  emerges  from  war  produc- 
tion with  greatly  added  capacity,  ready  to  take  up 
again  the  manufacture  of  motor  cars  in  increasing  num- 
bers with  the  added  equipment  and  greater  efficiency 
born  of  war  methods. 

The  war  has  enabled  us  to  stop  building  cars,  catch 
our  breath,  make  plans,  clean  house,  and  start  again 
with  clearer  vision,  with  greater  plans.  The  unfold- 
ing of  these  plans  will  be  of  colossal  importance  in  the 
reconstruction  of  business  and  living  conditions  through- 
out the  world. 

The  outlook  immediately  before  us  is  most  encour- 
aging. Commercial  reports  indicate  a  good  crop  yield, 
which  is  usually  an  indication  of  prosperity.  There  is 
demand  for  all  the  farm  produce  the  world  can  develop. 

AN  ERA   OF   PLENTY 

With  millions  of  men  engaged  in  actual  warfare  and 
millions  more  employed  solely  in  war-production  work, 
there  has  been  an  exhaustion  of  all  kinds  of  commodities 
throughout  the  world.  We  are  now  facing  a  period 


140  Reconstructing  America 

in  which  America  will  be  called  upon  to  make  up  this 
depleted  supply.  France  is  not  ready  as  yet  to  begin 
to  help.  Neither  are  other  European  countries  in  a 
position  to  supply  their  own  immediate  peace  needs  nor 
those  of  foreign  trade  markets  to  any  great  extent. 
America  is  entering  a  period  in  which  she  will  be  called 
upon  to  a  perhaps  unprecedented  degree. 

We  have  a  new  consciousness  of  responsibility  toward 
the  lowered  living  standards  of  three  fourths  of  the 
world.  American  capital  and  enterprise  will  be  needed 
in  unceasing  degree.  The  needs  of  the  world  will 
never  grow  less  and  America's  part  will  not  recede. 
In  that  lies  an  opportunity. 

There  is  no  reason  now  why  we  should  slip  back 
from  the  peak  production  which  was  reached  before  the 
war.  There  will  possibly  be  a  slight  slowing  down  in 
changing  over  to  other  kinds  of  work,  but  we  should 
rapidly  gather  speed  again  in  getting  back  on  a  peace 
basis. 

I  think  I  am  safe  in  anticipating  a  long  uninterrupted 
period  of  great  prosperity  in  this  country.  The  auto- 
mobile industry  will  contribute  a  large  share  in  this 
new  era  of  plenty. 

The  unavoidable  curtailment  in  manufacture  which 
many  of  us  regarded  with  anxiety  has  in  reality  proved 
a  blessing  in  disguise.  This  slowing  up  in  production 
permitted  the  manufacturers  to  devote  more  time  to 
future  merchandising  and  engineering  problems.  This 
has  placed  the  industry  in  position  fully  to  cope  with 
coming  conditions,  both  from  a  manufacturing  and 
merchandising  standpoint. 


Constructive  Finance  141 

THE   WASTES   OF  WAR 

Foreign  Loans  in  the  United  States 

The  statement  on  page  142  of  foreign  loans  placed  in 
the  United  States  and  at  present  outstanding  appeared 
in  the  Federal  Reserve  Bulletin  of  January,  1919. 


142 


Reconstructing  America 


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CHAPTER  VII] 
BANKING  AND   CREDITS 

A  NEW  ACCEPTANCE  SYSTEM  TO  ADVANCE  AMERICAN 

TRADE 

AN  enterprise  said  by  leading  bankers  to  be  "the 
most  important  business  movement  which  has  come 
before  the  country  in  some  years,"  was  successfully 
inaugurated  on  January  21,  1919,  in  New  York  City. 

Mr.  W.  P.  G.  Harding,  Governor  of  the  Federal 
Reserve  Board,  in  addressing  more  than  three  hundred 
of  the  most  prominent  bankers,  importers,  and  exporters 
in  America,  said : 


DEVELOPING  THE  AMERICAN  ACCEPTANCE  MARKET 

BY  W.   P.   G.   HARDING 

In  the  development  of  the  American  Acceptance 
Market  it  is  necessary  to  provide  not  only  an  outlet  for 
acceptances  but  means  of  securing  acceptances  of  bills 
in  adequate  volume,  and  in  order  to  enable  American 
banks  and  bankers  to  compete  with  British  banking 
houses  in  financing  the  world's  trade,  the  combined 
power  of  American  banks  whose  acceptance  can  be 
made  available  in  foreign  markets  to  accept  time  bills 
must  be  large  enough  to  meet  all  requirements,  for 

'43 


144  Reconstructing  America 

otherwise,  should  importers  find  that  it  is  only  occa- 
sionally that  they  can  obtain  dollar  acceptance  credits 
from  American  banks,  due  to  the  fact  that  these  banks 
have  reached  the  limit  of  acceptance  liabilities  provided 
by  law,  the  importers  will  naturally  return  to  the  ster- 
ling acceptances  which  are  available,  at  all  times,  in  suffi- 
cient amounts  to  meet  the  demand. 

OUR  ACCEPTANCE   CAPACITY 

On  a  recent  date  American  banks  whose  acceptances, 
allowing  the  greatest  latitude  possible,  might  be  consid- 
ered available  in  foreign  markets  were  found  to  have 
acceptances  outstanding  to  the  amount  of  $477,500,000, 
and  under  existing  limitations  on  this  basis  their  accept- 
ance liability  can  be  increased  by  $630,000,000,  pro- 
vided every  bank  included  in  the  list  should  be  called 
upon  to  accept  to  the  full  extent  of  its  ability.  Many 
of  these  banks,  however,  are  located  in  inland  cities, 
and  their  acceptances  are  undoubtedly  largely  against 
domestic  transactions.  When  they  do  accept  on  foreign 
transactions  it  is  usually  in  connection  with  some  credit 
in  which  they  have  been  invited  to  participate. 

In  the  three  cities  of  Boston,  New  York,  and  Phila- 
delphia the  acceptance  line  still  available  for  use  by  the 
accepting  institutions  is  only  $227,000,000.  The  cities 
of  Baltimore,  Wilmington,  and  Charleston,  on  the  East- 
ern seaboard,  can  accept  for  about  $10,708,000  more, 
making  a  total  available  for  the  promotion  of  foreign 
trade  of  cities  on  the  Atlantic  slope  of  about  $238,000,000, 
while  the  foreign  trade  naturally  financed  in  these  cities 
would  require  a  much  larger  line  if  any  considerable 
proportion  were  covered  by  dollar  acceptances. 


Banking  and  Credits  145 

LEGISLATION  NECESSARY 

In  order  to  provide  additional  facilities  for  transact- 
ing our  foreign  business  it  may  be  advisable  to  ask  Con- 
gress that  section  13  of  the  act  be  amended  so  as  to  permit 
the  Federal  Reserve  Board  to  authorize  any  member 
bank  having  a  combined  capital  and  surplus  of  not  less 
than  $1,000,000  to  accept  drafts  or  bills  of  exchange 
drawn  upon  it,  having  not  more  than  six  months'  sight 
to  run,  exclusive  of  days  of  grace,  which  grow  out  of 
transactions  involving  the  importation  or  exportation 
of  goods,  to  an  amount  not  exceeding  200  per  centum  of 
its  capital  and  surplus,  provided  that  no  banks  shall 
be  permitted  to  accept  of  domestic  transactions  in  an 
amount  greater  than  50  per  centum  of  its  capital  and 
surplus,  or  more  than  50  per  centum  of  its  capital  and 
surplus  for  the  purpose  of  furnishing  dollar  exchange, 
but  that  any  may  be  used  in  accepting  drafts  or  bills 
of  exchange  growing  out  of  transactions  involving  the 
importation  or  exportation  of  goods. 

By  limiting  the  authority  to  accept  in  the  larger 
amount  proposed,  to  foreign  transactions,  there  would 
be  no  possibility  of  the  added  acceptance  privilege 
being  used  for  the  expansion  of  domestic  credits,  and 
the  aggregate  amount  of  acceptance  outstanding  would 
be  controlled  by  our  foreign  trade  requirements. 

Mr.  Warburg's  views  on  this  tremendously  important 
matter  of  granting  credits  to  other  countries  through  a 
new  acceptance  system  are  as  follows : 


146  Reconstructing  America 

II 

VALUE  OF  CUMULATIVE  EFFORT 

BY  PAUL  M.  WARBURG 

While,  generally  speaking,  it  is  readily  conceded  that 
it  is  the  duty  of  the  United  States  to  use  its  newly 
acquired  gigantic  financial  strength  in  granting  credits 
to  other  countries,  it  is  little  realized  that  this  aim  and 
duty  of  ours  cannot  be  accomplished  by  any  small 
group  of  banks  or  men,  but  that  in  order  to  bring  our 
plans  to  the  fullest  possible  realization,  everybody  has 
to  do  his  share.  The  war  has  taught  us  the  value  of 
cumulative  effort  in  warfare,  as  well  as  in  saving.  This 
cumulative  effort  is  necessary  also  in  banking  if  the 
United  States  is  to  become  a  leading  financial  center 
of  equal  importance  with  the  strongest  of  Europe. 

In  saying  this  I  do  not  mean  to  indicate  that  I  wish 
to  see  small  and  unimportant  banks  entering  the  accept- 
ance field ;  quite  the  contrary,  it  is  important  that  the 
class  of  acceptances  that  will  be  offered  in  the  American 
discount  market  should  be  uniformly  of  the  highest 
possible  standard.  .  .  . 

MUST   PROCEED   CAUTIOUSLY 

I  believe  that  in  developing  the  acceptance  business 
in  the  United  States  it  is  most  important  that  we  should 
proceed  cautiously  and  avoid  any  untoward  event 
which  could  undermine  the  absolute  confidence  in  our 
bankers'  acceptances  as  an  investment  both  here  and 
abroad.  In  other  words,  we  must  do  everything  to  avoid 
failures  which  might  result  from  over-expansion,  over- 
aggressiveness  and  recklessness  in  granting  credits.  .  .  . 


Banking  and  Credits  147 

»  There  is  nobody  more  ambitious  than  I  in  wishing 
the  United  States  to  become  a  leader  in  the  acceptance 
business,  but  I  believe  the  basis  for  it  must  be  furnished 
by  a  proportionate  increase  in  capital  and  surplus, 
or  by  organizing  a  growing  number  of  acceptance  cor- 
porations, or  by  interesting  a  growing  number  of  pri- 
vate banking  firms,  but  not  by  unreasonably  over- 
extending  the  individual  acceptance  obligations.  I 
believe  that  the  future  of  the  American  acceptance  is 
an  extremely  bright  one,  because  the  relative  attractive- 
ness of  international  acceptance  rates  is  largely  governed 
by  the  gold  power  of  the  few  countries  involved  in 
that  business.  <  I  $] 

It  is  impossible  to  foretell  at  this  moment  what  our 
position  will  be  at  the  conclusion  of  peace,  and  how  far 
arrangements  to  be  made  between  the  Allies,  and 
possibly  with  other  countries,  will  affect  our  present 
position  of  great  gold  strength.  As  conditions  appear 
to-day,  it  would  seem  that  the  easiest  and  most  natural 
way  for  us  to  share  this  strength  with  others  would  be 
by  taking  upon  our  shoulders  ~a,  large  share  of  the  credit 
business,  and  particularly  in  the  granting  of  banking 
credits  to  be  furnished  by  the  world's  banking  centers. 

Ill 

USURY  AND  THE  BANKS 

BY  HON.  JOHN  SKELTON  WILLIAMS 

Comptroller  of  the  Currency 

Thoughtful  and  conservative  bankers  —  the  men 
who  really  lead  the  banking  sentiment  of  the  coun- 
try —  in  numbers  steadily  and  rapidly  increasing,  are 


148  Reconstructing  America 

now  setting  their  faces  and  giving  their  influence  against 
an  evil  that  for  years  had  not  only  impeded  the  growth 
but  was  threatening  the  commercial  life  of  important 
sections  of  our  country,  because  oppressive  and  con- 
tinuing usury  inevitably  means  poverty  and  failure; 
and  poverty  and  failure  breed  discontent  which  strikes 
blindly  to  destroy  and  tear  down. 

The  business  man,  the  laborer,  the  farmer  driven  to 
ruin  by  what  he  believes  to  be  unjust  exactions,  sanc- 
tioned or  permitted  by  law,  becomes  an  anarchist  at 
heart,  carries  within  himself  a  sullen  resentment  ready 
to  be  touched  to  volcanic  outburst  by  the  first  approach 
of  opportunity.  He  has  no  hope  but  vengeance.  His 
fury  when  he  may  give  it  vent  is  directed  against  the 
conditions  under  which  he  has  been  oppressed.  ^j 

The  vice,  or  evil,  or  peril  of  usury  —  it  is  all  three  — 
is  no  new  thing  under  the  sun  and  was  not  peculiar  to 
this  country.  It  was  spreading  among  us,  however, 
with  rapidity  no  casual  observer  would  suppose,  and 
in  different  communities  was  silently  and  secretly 
sapping  the  life  and  eating  away  the  foundations  of 
commercial  and  social  life  to  an  unsuspected  extent. 
I  do  not  wish  to  talk  politics  or  to  discuss  socialism. 
I  have  had  opportunity,  however,  to  notice  that  States 
and  communities  in  which  literature  presenting  the 
most  violent,  dangerous,  and  incendiary  forms  of  per- 
verted socialism  was  most  eagerly  read  and  accepted 
were  precisely  those  in  which  my  reports  showed  the 
interest  charges  to  small  borrowers  were  most  extor- 
tionate. 

The  sin  is  one  of  the  oldest  known  to  humanity,  and 
is  believed  to  have  been  indirectly  aimed  at  in  the  Tenth 


Banking  and  Credits  149 

Commandment.  The  Hebrew  word  for  usury  signifies 
"cruel  biting."  Probably  it  began  to  bite  along  with 
the  saber  tooth  tiger.  Its  derivation  may  have  sug- 
gested to  a  great  English  judge  of  five  centuries  ago  his 
attempt  to  distinguish  between  what  he  called  "biting 
usury,"  meaning  exorbitant  rates,  and  "toothless 
usury,"  or  reasonable  interest  charges.  .  .  . 

During  most  of  the  periods  of  Roman  history  and 
before  its  decline  and  fall,  usury  was  treated  as  an  aggra- 
vated species  of  theft  and  punished  with  great  severity. 
Whereas  the  punishment  for  theft  was  only  a  forfeiture 
of  double  the  value  of  the  thing  stolen,  in  usury  the 
criminal  was  punished  by  condemnation  and  forfeiture 
of  four  times  the  value  of  the  usury  taken.  This  severe 
penalty,  it  is  said,  was  grounded  on  sound  governmental 
reasons,  for  it  was  seen  in  those  days  that  usury  was 
one  of  the  most  frequent  causes  of  sedition  and  discord 
among  the  people. 

McADOO  EMULATED  TIBERIUS  CESAR 

Secretary  McAdoo,  in  depositing,  as  he  did  on  sev- 
eral occasions,  many  millions  of  dollars  in  the  banks  to 
alleviate  the  strain  and  bring  down  heavy  interest  rates 
which  were  being  demanded  in  certain  parts  of  the 
country,  found  a  precedent  for  so  doing  in  the  acts  of 
Tiberius  Caesar,  who,  the  ancient  historian  tells  us, 
deposited  a  "marvelous  sum  of  money  in  the  banks  of 
Rome,"  the  amount  being  estimated  at  500,000  pounds 
sterling,  or  about  two  and  a  half  million  dollars,  for 
the  purpose  of  breaking  rates  charged  by  usurers  in 
those  days,  and  this  money  was  offered  freely  to  those 
debtors  who  were  able  to  give  bond  and  security  to 


150  Reconstructing  America 

double  the  value  of  the  money  borrowed.  Secretary 
McAdoo's  terms  were  more  liberal. 

"The  canker  of  usury,"  says  Tacitus,  "is  an  old 
venomous  foe  and  is  the  chief  head  of  rebellion  and 
variance  in  countries,  and  it  was  therefore  banished 
in  the  old  times." 

In  England,  as  early  as  the  reign  of  Alfred  the  Great, 
laws  were  enacted  against  usury,  usurers  forfeited  to 
the  king  their  chattels,  while  their  land  escheated  to 
the  Lords  of  the  Fee,  and  it  was  further  provided  that 
usurers  should  not  be  buried  in  the  sanctuary.  In  the 
reign  of  Edward  the  Confessor,  one  hundred  and  fifty 
years  later,  the  laws  provided  that  the  usurer  should 
forfeit  all  his  substance,  be  outlawed,  and  his  heir 
disinherited.  Other  punishments  were  added  by  William 
the  Conqueror,  such  as  whipping,  exposure  on  the  pillory, 
and  perpetual  banishment. 

In  the  Magna  Charta,  in  1215,  attempts  were  made 
to  regulate  or  restrain  usury,  the  provision  inserted 
showing  clearly  how  general  the  evil  was  and  how 
oppressive.  .  .  . 

In  this  country  the  colonies  first  and  the  States  later 
undertook  to  fix  and  regulate  the  rates  of  interest  and 
to  define  and  prohibit  usury.  Massachusetts  fixed 
the  legal  rate  at  eight  per  cent  in  1641,  and  reduced 
it  to  six  per  cent  three  years  later.  Some  of  the  older 
States,  however,  refused  to  adopt  usury  laws  until  within 
recent  years.  In  many  of  our  States,  usury  statutes 
have  been  and  are  ignored,  and  where  the  transgressions 
against  the  usury  law  have  been  most  marked  and 
where  usury  has  flourished  most,  unmolested,  we  find 
enterprise  hampered  and  many  unhealthy  conditions 


Banking  and  Credits  151 

engendered;  which  reminds  one  of  a  saying  credited 
to  Diogenes,  that  "where  neither  laws  have  force  nor 
water  hath  course,  there  no  wise  man  seeks  to  dwell." 

To  the  substantial  business  man,  accustomed  to 
reasonable  accommodations  from  banks,  there  is  a  kind 
of  ghastly  humor  in  some  of  the  revelations  resulting 
from  an  investigation  into  the  subject  of  usury  con- 
ducted some  months  ago  by  the  Comptroller's  office. 

USURY  AIMS  AT  AMERICAN  BANKS 

It  was  ascertained  at  that  time  that  1,247  national 
banks,  out  of  a  total  of  7,600,  were  openly  charging  rates 
of  interest  forbidden  by  the  laws  of  their  respective 
States  and  by  the  National  Bank  Act,  and  that  despite 
the  easy  money  conditions,  2,743  banks  were  charging 
on  some  of  their  loans  interest  of  ten  per  cent  or  more 
per  annum. 

One  bank  admitted  under  oath  that  it  was  charging 
an  average  of  twenty-five  per  cent  per  annum  on  all  of 
its  loans ;  another,  an  average  of  thirty-six  per  cent ; 
and  a  third,  an  average  of  forty  per  cent  per  annum  on 
all  loans. 

The  alarming  part  of  all  this  is  that  wherever  such  a 
case  of  oppression  occurred  the  agitators,  the  chronic 
trouble  makers,  and  the  demagogues  of  the  neighborhood 
or  the  county  made  it  the  text  for  incitement  of  rage 
against  the  capital  and  the  commercial  methods  of  the 
entire  country.  I  will  mention  just  a  few  actual  loans 
made  by  national  banks  and  reported  under  oath  to 
the  Comptroller's  office,  which  may  serve  as  illustration. 

Here  is  a  loan  of  $1,000  for  a  month  and  a  half  at  sev- 
enty-seven per  cent;  a  loan  of  $2,067  f°r  a  month  at 


152  Reconstructing  America 

sixty-five  per  cent;  $553  for  two  months  at  eighty-five 
per  cent ;  $491  for  eighty  days  at  fifty  per  cent ;  $200 
for  three  months  at  fifty  per  cent. 

A  visitor  to  my  office  from  a  certain  State  not  long 
ago,  who  held  a  high  public  office  in  that  State,  told 
me  of  a  loan  for  $90  made  to  a  farmer  to  help  him  to 
raise  his  crops,  the  loan  being  for  less  than  a  year.  He 
said  that  the  bank  had  charged  this  farmer,  in  addition 
to  a  large  rate  of  interest,  an  extra  sum  of  $50  for  the 
trouble  of  going  out  to  look  at  the  land  and  for  a  few 
preliminaries  to  the  loan. 

The  practice  of  making  a  deduction  for  expense,  in 
addition  to  the  rate  of  interest,  seems  also  to  have  been 
an  ancient  one  and  to  have  been  resorted  to  hundreds 
of  years  ago.  It  has  prevailed  to  an  inexcusable  extent 
up  to  a  very  recent  date  in  certain  of  our  States.  But 
in  the  past  year  or  so,  there  has  been  a  vast  improve- 
ment in  the  matter  of  interest  rates  throughout  the 
country.  Hundreds  of  banks  have  made  perpendicular 
drops  from  the  excessive  rates  which  they  formerly 
charged.  Many  had  been  charging  on  some  of  their 
loans  as  much  as  fifty  per  cent  or  twenty  per  cent,  and 
in  hundreds  of  cases  they  have  come  within  the  legal 
rates  of  their  respective  States. 

NOW,   THE   BANKS   ARE   REDUCING  RATES 

In  other  instances,  where  only  twelve  per  cent  to 
fifteen  per  cent  rates  had  prevailed,  borrowers  are  now 
accommodated  at  six  per  cent  and  eight  per  cent.  Some 
banks  have  adopted  a  conservative  course  and  appar- 
ently have  been  afraid  to  reduce  their  rates  too  suddenly, 
but  they  are  moving  in  the  right  direction.  One  bank 


Banking  and  Credits  153 

testifies  under  oath  that  it  has  succeeded  in  reducing 
its  maximum  rate  from  360  per  cent  to  109  per  cent. 
Another  in  the  same  State  reports  that  it  has  already 
brought  its  maximum  rate  down  from  300  to  30  per 
cent;  others  report  that  they  have  brought  their  aver- 
age rates  of  eighteen  per  cent  and  twenty-two  per  cent 
down  to  the  legal  rate  of  ten  per  cent.  .  • 

These  sensational  and  inexcusable  rates,  however, 
are  steadily  disappearing  from  the  sections  where 
they  have  formerly  prevailed,  and  people  of  every  part 
of  this  country  are  at  this  moment  securing  money  for 
all  purposes,  whether  it  be  for  commercial  business, 
farming,  or  industrial  purposes,  on  more  favorable 
terms  than  ever  before  in  the  history  of  our  country. 

In  divers  instances  national  banks  which  have  been 
called  on  to  reduce  their  rates  of  interest  to  those  per- 
mitted by  law,  have  not  only  complied  but  have  advised 
my  office  that  they  were  conducting  their  business  on 
a  plane  which  is  proving  not  only  more  satisfactory 
to  their  customers,  but,  all  things  considered,  more 
satisfactory  to  the  banks  themselves,  as  their  business 
is  showing  a  healthy  expansion  in  response  to  more 
liberal  treatment.  .  .  ,  Many  farmers  who  had  never 
known  what  it  was  to  borrow  money  below  twelve 
per  cent,  even  on  cotton,  through  the  operations  of 
the  Federal  Reserve  System  are  now  enabled  to  borrow 
from  their  local  banks  at  six  per  cent,  and  the  small  local 
banks  are  able  to  borrow  in  their  turn  from  the  Federal 
Reserve  Banks  at  three  to  four  and  one  half  per  cent. 

To  overcome  the  whole  trouble  and  rid  the  farmer 
and  the  small  merchants  in  the  rural  districts  of  the 
exactions  which  have  often  crippled  and  sometimes 


154  Reconstructing  America 

destroyed  them,  a  bill  has  been  introduced  in  Congress, 
requiring  all  national  banks  to  keep  a  record  showing 
the  rate  of  interest  charged  on  each  and  every  loan, 
and  authorizing  and  directing  the  Department  of  Justice 
to  bring  suit  against  usurers,  upon  information  secured 
by  the  Department  from  the  Comptroller  of  the  Cur- 
rency, or  from  other  sources.  If  this  becomes  a  law, 
it  will  be  possible  to  eradicate  entirely  usury  from  na- 
tional banks.  It  would  be  difficult  to  overestimate 
the  blessings  which  will  come  to  many  thousands  of 
borrowers  in  all  parts  of  the  country  if  the  maximum 
rate  of  interest  throughout  the  States  should  be  reduced 
from  one  hundred  per  cent  and  more,  which  has  been 
charged  in  the  recent  past  in  many  banks,  to  a  maximum 
of  six  or  eight  or  even  ten  per  cent,  according  to  the 
legal  rate  in  the  respective  States. 


CHAPTER  VIII 
THE  PROBLEM  OF  PAYING;  OUR .  WAR  DEBT 

I 
WHO  WILL  PAY  THE  TAXES? 

BY  FRANK  H.   SISSON 
Vice  President  Guaranty  Trust  Co.,  New  York  } 

FINANCIERS  are  now  giving  considerable  thought 
to  our  national  indebtedness  with  a  view  to  deter- 
mining the  best  method  for  paying  it  off.  It  may 
be  well  in  considering  this  problem  to  recall  that  Gov- 
ernments have  not  usually  made  it  a  policy  to  retire 
their  indebtedness.  Great  Britain  has  issued  her 
consols,  which  are  a  perpetual  debt,  and  these  have 
been  considered  the  best  indicator  of  Great  Britain's 
credit.  France  has  issued  her  rentes,  which  also  consti- 
tute a  perpetual  debt.  The  United  States  stands  alone 
as  a  debt-reducing  country,  but  this  has  probably  been 
due  to  surplus  revenues,  which  have  been  coincident 
with  the  general  expansion  of  the  trade  and  industry 
of  the  country. 

The  war  debt  of  the  country  today  is  approximately 
$16,000,000,000,  of  which  nearly  $8,000,000,000  repre- 
sents advances  to  Allies,  and  if  it  be  assumed  that  the 
gross  debt  will  be  increased  to  $25,000,000,000  before 
we  are  through  with  the  period  of  demobilization,  and 
advances  made  to  Allies  be  increased  to  $9,000,000,000  or 


156  Reconstructing  America 

$10,000,000,000,  it  would  appear  that  our  net  debt 
would  not  be  a  heavy  one  for  this  country.  In  addition, 
consideration  must  be  given  to  the  capital  investments 
that  have  been  made  by  our  Government  and  which  will 
continue  to  be  made  through  the  development  of  our 
shipbuilding  program.  These  would  further  reduce  the 
total  amount  of  the  debt.  The  payment  of  the  interest 
on  this  debt  would  not  seem  to  be  a  heavy  burden 
when  compared  with  our  total  national  income  and 
our  national  wealth,  but  if  we  had  to  pay  off  the  debt 
in  a  relatively  short  period  of  time  the  burden  would 
really  become  heavy.  And  we  must  also  bear  in  mind 
that  our  Government's  post-war  expenditures  will 
certainly  be  at  least  three  or  four  times  what  they  were 
prior  to  the  war,  or,  at  a  conservative  estimate,  in 
excess  of  $3,000,000,000  annually  for  the  next  few  years. 

WHAT   OUR   WAR   DEBT   REPRESENTS 

Our  present  debt  probably  represents  the  savings 
of  the  country  as  indicated  by  our  best  estimates  of 
the  total  volume  of  annual  savings.  Wars  are  fought 
with  present  goods,  and  a  postponement  of  the  liquida- 
tion of  a  war  debt  does  not  involve  the  shifting  to  future 
generations  of  a  burden  which  is  not  properly  their 
own.  In  fact,  it  is  not  a  shifting  of  a  burden  from  one 
generation  to  another  at  all,  for  whether  the  debt  period 
be  a  long  or  a  short  one,  at  every  payment  of  interest 
or  a  portion  of  the  principal,  the  income  and  the  outgo 
are  absolutely  equal. 

The  nation  as  a  whole  will  owe  to  the  holders  of  its 
bonds,  let  us  say,  some  $25,000,000,000.  The  payment 
involves  a  redistribution  of  the  control  of  the  wealth 


The  Problem  of  Paying  Our  War  Debt    157 

of  the  country.  Necessarily  the  taxes  will  be  paid 
quite  largely  by  those  whose  incomes  are  evidence  of 
their  capability  to  use  wealth  advantageously  for  them- 
selves and  for  society.  Therefore,  even  if  we  had  an 
ideally  just  system  of  taxation,  it  would  still  be  probable 
that,  in  large  part,  the  rapid  payment  of  the  debt  from 
revenues  collected  would  involve  the  transfer  of  wealth 
from  those  capable  of  making  best  use  of  it  to  those 
less  capable  of  using  it  so  advantageously. 

An  attempt  to  retire  the  debt  in  a  relatively  short 
period  of  time  would  necessitate  a  continuation  of 
heavy  taxes  which  probably  would  place  a  heavy  burden 
upon  industry,  and  this  would  certainly  be  unwise. 

V 

II 

THIS  GENERATION  MUST  PAY  THE  COST  OF  WAR 

BY  PROFESSOR  C.   C.   ARBUTHNOT 

Western  Reserve  University 

What  are  the  " costs  of  war"?  The  answers  to  this 
question  will  depend  upon  the  angles  from  which  the 
great  problem  is  attacked.  The  wastes  of  righting 
impress  different  observers  according  to  their  individual 
outlooks  and  bulk  large  within  each  particular  range 
of  view.  Perhaps  the  chief  matters  of  concern  in  such 
an  inquiry  lie  in  the  fields  indicated  by  three  topics : 
(a)  The  human  costs,  (b)  The  cost  in  materials,  (c) 
The  cost  in  money.  The  subdivision  of  the  subject 
should  not  convey  the  impression  that  the  parts  are 
unconnected  or  sharply  marked  off  one  from  the  other, 
but  rather  that  the  whole  theme  will  be  easier  of  com- 
prehension if  the  parts  are  considered  one  at  a  time. 


158  Reconstructing  America 

I.    THE  HUMAN  COSTS   OF  WAR 

The  pen  halts  at  the  thought  of  recording  the  human 
costs  of  war.  The  broken  bodies  and  the  shattered 
minds,  the  pains  and  anxiety,  the  horrors  and  despair, 
the  wrecked  relationships  and  the  accumulations  of 
hate,  the  benumbed  hearts  and  the  seared  souls,  all 
that  the  soldier  endures  at  the  front,  and  carries  through 
life  with  him  if  he  returns,  all  that  his  friends  and  rela- 
tives bear  while  he  is  away  and  bend  under  if  he  does 
not  come  back :  all  these  costs  are  too  many  and  great 
to  be  numbered.  .  .  . 

2.    THE   COST   OF   WAR   IN  MATERIALS 

The  materials  consumed  in  warfare  are  the  product 
of  toil  and  sacrifice  and  may  not  be  too  independently 
considered  as  distinct  from  the  human  elements  of 
the  problem.  Men  and  women  have  changed  the  cur- 
rent of  their  lives  and  undergone  risk  and  strain  second 
only  to  those  of  the  soldier  in  order  that  the  latter 
might  be  properly  equipped  for  the  direct  conflict  with 
the  foe. 

The  materials  now  devoted  to  the  purposes  of  war 
are  largely  the  product  of  current  efforts.  Not  a  great 
amount  of  goods  and  equipment  have  been  carried 
over  from  the  stocks  of  past  years.  Little  can  be  ob- 
tained at  the  expense  of  the  future. 

In  a  sense  the  future  can  be  drawn  upon  for  material 
help,  but  again  the  amount,  compared  with  what  must 
be  secured,  is  not  of  great  significance.  After  all  possible 
allowance  has  been  made  it  is  only  too  clear  that  the 
materials  of  war  must  be  made  as  the  struggle  goes 


The  Problem  of  Paying  Our  War  Debt    159 

on  and  that  the  people  of  to-day  must  pay  this  cost  by 
increased  labor  and  saving.  This  burden  of  providing 
the  enormous  quantities  of  munitions  and  supplies  is 
as  imperative  a  daily,  current  duty  as  is  the  service 
of  the  soldier  in  the  trenches.  It  cannot  be  put  off 
nor  escaped.  The  soldiers  of  to-day  fight  with  the 
products  of  civilian  laborers  of  to-day.  The  costs 
of  war  in  materials  must  be  paid  by  this  generation, 
it  cannot  be  passed  on  to  the  future.  No  methods  of 
combining  note  issues,  bond  sales,  and  production  of 
the  material  equipment  for  the  fighting  force  in  taxa- 
tion can  alter  the  situation.  While  the  fighting  is  on, 
and  not  after  it  is  over,  must  the  civilians  work  and  save 
to  make  the  needed  goods.  The  economic  costs  of 
reconstruction  when  peace  comes  will  be  additions  to 
the  costs  of  war,  not  payments  for  it  nor  reductions  in 
the  expense. 

The  call  to  work  and  save  is  as  immediate  and  press- 
ing as  the  call  to  fight.  Neither  can  be  escaped  nor 
postponed. 

Saving  is  important  because  it  releases  labor  and 
material  from  civilians'  uses  and  turns  them  to  the 
public  service.  The  spender  in  essence  asks  people  to 
work  for  him  or  furnish  material  for  his  own  satisfac- 
tion. On  the  other  hand,  if  he  saves  and  turns  his 
funds  over  to  the  government  he  gives  to  his  country 
the  power  to  secure  this  labor  and  material  for  public 
defense  while  he  foregoes  its  private  enjoyment.  Greater 
saving  and  greater  exertion  in  making  equipment  must 
precede  the  fighting,  not  follow  it.  The  cost  of  war  in 
terms  of  goods  must  be  met  to-day.  It  cannot  be 
passed  on  to  succeeding  generations. 


160  Reconstructing  America 

3.  THE  COST  OF  WAR  IN  TERMS  OF  MONEY 

The  principal  methods  through  which  money  for  war 
purposes  may  be  obtained  are  six  in  number : 

1.  Requisitions    in    occupied    territory.     Germany's 
practice  in  Belgium  serving  as  an  example. 

2.  Indemnity  from  a  conquered  enemy.     Germany's 
policy  at  the  end  of  the  Franco-Prussian  War  and  at 
the  beginning  of  this  war. 

3.  The  profits  of  state-owned  industries,  as  the  Ger- 
man railways  or  the  mines  of  England  as  suggested  by 
the  Fabian  socialists. 

4.  Issue  of  paper  money,  as  the  greenbacks  in  our 
Civil    War    and    Germany's    present    issue,    disguised 
though  they  are  as  issues  of  banking  institutions. 

5.  The  sale  of  bonds  to  be  paid  for  by  taxes  after 
the  war. 

6.  Taxation  during  the  war. 

The  following  discussion  will  concern  itself  with  the 
consideration  of  the  effects  of  the  second  three  methods 
of  raising  the  money  needed  for  war  purposes. 

The  issue  of  paper  money  and  sale  of  bonds  are  alike 
in  that  they  arc  both  loans,  though  very  different  in 
that  the  note  issue  is  a  forced  loan  that  inflates  the 
currency,  while  the  bond  purchase  is  a  voluntary  trans- 
action that  does  not  necessarily  produce  inflation.  All 
three  are  alike  in  that  the  taxpayers  have  to  foot  the 
bills,  though  collection  is  postponed  in  the  case  of  the 
first  two.  Bonds  and  taxes  are  alike  in  that  the  bond 
buyer  and  the  taxpayer  must  turn  over  the  money  to 
the  government  at  once,  though  what  is  received  for 
the  money,  a  bond  in  one  case  and  a  tax  receipt  in  the 


The  Problem  of  Paying  Our  War  Debt    161 

other,  differ  widely.  Furnishing  the  money,  like  furnish- 
ing the  men  and  the  materials  for  war,  cannot  be  passed 
on  to  later  generations.  All  three  must  be  provided 
now  by  the  people  of  to-day.  Whatever  may  come 
back  in  the  future  does  not  alter  the  fact  that  all  three, 
the  money,  the  men,  and  the  materials,  must  be  given 
up  by  the  people  of  the  present  if  there  is  to  be  any 
future  worth  looking  forward  to.  An  examination  of  the 
different  financial  expedients  for  putting  the  government 
in  funds  will  indicate  the  characteristic  features  of  each 
one  and  the  economic  consequences  of  its  employment. 

A.  The  Issue  of  Paper  Money.  —  This  is  the  easiest 
way,  but  the  suggestion  of  its  adoption  is  the  counsel 
of  folly  or  despair.     Our  experience  in  the  Civil  War 
and  the  bitter  lessons  from  other  times  and  countries 
ought  to  keep  us  from  repeating  the  monumental  blunder 
of  financial  incompetence.   .  .  . 

B.  Borrowing  by  Selling  Bonds.  —  No  nation  is  ever 
likely  to  put  into  operation  an  adequate  taxing  system 
upon  the  outbreak  of  war.     A  militant  oligarchy  hopes 
to  pay  the  expenses  of  its  adventures  out  of  indemnities 
collected  from  the  defeated  enemy,  while  democracies 
will  never  be  so  prepared  for  war  that  they  will  have  at 
hand  a  system  of  war  taxes  devised  in  advance  and  ready 
for  immediate  enactment  when  the  crisis  comes.     But 
money  must  be  secured  at  once.     Resort  is  therefore 
had  to  the  sale  of  bonds  as  the  effective  method  for 
obtaining  the  required  funds,  usually  preceded  by  issues 
of  short-time  certificates  of  indebtedness  in  anticipation 
of  the  proceeds  from  the  bonds.     Bonds  have  this  very 
great  advantage  of  the  superior  quickness  with  which 
they  yield  the  required  funds. 


162  Reconstructing  America 

A  second  significant  feature  of  bond  sales  arises  out 
of  the  fact  that  their  purchase  is  a  voluntary  action. 
Joined  with  this  is  the  convenience  in  denomination 
and  terms  of  payment.  As  a  result  citizens  can  adjust 
the  amount  purchased  to  their  respective  abilities  in 
a  fashion  that  will  allow  persons  of  modest  means  to 
turn  over  their  savings  to  the  government,  as  well  as 
offer  the  opportunity  to  every  other  group  in  the  country 
to  advance  the  needed  money  in  such  measure  as  their 
resources  will  permit.  By  tapping  each  store  in  accord- 
ance with  its  contents  the  bond  shows  itself  a  flexible 
instrument  by  means  of  which  the  hidden  wealth  and 
unsuspected  financial  resources  of  the  great  body  of 
citizens  are  made  available  for  the  public  service. 
People  voluntarily  turn  over  to  the  government  in 
exchange  for  bonds  great  sums  of  money  that  otherwise 
would  lie  beyond  the  ken  of  the  taxgatherer  or  that 
could  be  reached  only  by  the  most  inquisitorial  methods, 
which  would  tend  to  defeat  themselves  by  arraying 
the  ingenuity  of  the  owners  against  the  inadequate 
knowledge  of  the  officers  of  the  law. 

The  fruitful  resource  of  bond  sales  is  so  effective  be- 
cause it  unites  the  two  powerful  appeals  of  patriotism 
and  personal  profit.  To  this  call  upon  patriotic  feeling 
is  added  the  prospect  of  economic  advantage  due  to  the 
safety  of  the  principal  and  the  payment  of  pure  interest 
on  the  loan ;  that  is,  interest  from  which  nothing  need 
be  deducted  as  insurance  against  risk  or  for  care  and 
skill  in  management.  The  probable  premium  on  the 
bonds  after  the  war  is  also  an  inducement.  A  much 
greater  advantage  is  promised  by  the  probable  fall  in 
prices  after  the  war.  If  we  assume  that  present  prices 


The  Problem  of  Paying  Our  War  Debt    163 

are  about  fifty  per  cent  higher  on  the  average  than 
pre-war  prices,  then  a  dollar  to-day  will  buy  no  more 
than  65  cents  bought  in  1914.  If  prices  after  the  war 
fall  to  the  pre-war  level  a  dollar  then  will  buy  as  much 
as  a  dollar  and  fifty  cents  will  purchase  to-day.  The 
saver  who  chooses  to  buy  a  one  hundred  dollar  bond 
to-day  rather  than  spend  $100  for  current  consumption 
is  in  reality  choosing  between  $65  worth  of  goods  now 
and  $100  worth  of  goods  after  the  war,  measured  on  a 
peace-price  basis.  In  other  words  $100  invested  in  a 
bond  now  will  command  when  the  bond  is  paid  as  many 
commodities  as  $150  will  buy  to-day.  This  is  a  real 
premium  and  a  large  one,  overlooked  usually  because 
people  think  too  much  in  terms  of  money  and  not  enough 
in  terms  of  goods. 

Added  to  this  gain  after  the  war  is  another  advantage 
that  comes  from  saving  now.  Refraining  from  unneces- 
sary buying  for  private  use  during  the  war  reduces 
the  demand  for  commodities  and  thus  lessens  the  tend- 
ency of  prices  to  move  in  an  upward  direction.  People 
by  continuing  their  usual  buying  compete  with  each 
other  and  the  government  in  the  purchase  of  goods. 
By  this  persistent  bidding  among  private  individuals 
and  against  the  government  the  level  of  prices  is  raised 
all  around  and  money  spent  does  not  go  as  far  as  before. 
On  the  other  hand,  turning  part  of  one's  outlay  into 
bonds  reduces  this  competitive  demand,  checks  the 
rise  in  prices,  and  makes  what  one  does  spend  for  con- 
sumable goods  able  to  get  more  goods  in  the  market. 
Saving  thus  makes  more  saving  easier  by  moderating 
the  rising  cost  of  living. 

When  it  is  evident  that  buying  bonds  combines  these 


164  Reconstructing  America 

economic  advantages  of  (i)  safety  of  principal  with 
(2)  pure  interest,  (3)  a  probable  premium  on  the  bonds 
after  the  war,  (4)  an  even  more  probable  advantage 
of  greater  amount  through  a  fall  in  prices  when  peace 
comes,  with  a  consequent  increase  in  the  purchasing 
power  of  their  savings,  and  (5)  a  tendency  to  mitigate 
the  rise  in  prices  during  the  war :  when  it  is  seen  that 
these  individual  advantages  are  joined  with  the  oppor- 
tunity to  be  of  public  service,  the  combination  of  pa- 
triotism and  profit  places  at  the  government's  disposal 
great  sums  of  money  with  remarkable  speed,  a  result 
that  is  vital  at  the  outbreak  of  war. 

C.  Taxation  in  War  Time.  —  It  has  long  been  sug- 
gested that  part  of  the  prudent  preparedness  for  war 
should  be  an  outline  scheme  of  taxation,  drawn  up  in 
advance,  ready  to  be  filled  in  and  enacted  promptly 
upon  mobilization.  But  for  reasons  indicated  above 
this  has  never  been  done. 

The  process  of  enacting  tax  legislation  is  slow,  con- 
sidering the  emergency  to  be  met,  and  the  result  is  likely 
to  be  a  statute  satisfactory  to  no  one,  oppressive  to 
many,  and  unworkable  in  some  of  its  parts  unless  sup- 
plemented or  modified  by  administrative  rulings.  The 
crudities  have  to  be  hammered  out  on  the  anvil  of 
experience. 

With  these  disadvantages  to  be  met,  the  returns  from 
taxes  come  into  the  public  treasure  slowly,  too  slowly 
to  furnish  funds  for  the  great  emergency,  without  the 
assistance  to  be  had  from  bonds. 

Along  with  this  defect,  taxation  has  the  great  merit 
of  compulsion  that  is  lacking  in  the  case  of  bonds  except 
so  far  as  it  is  provided  by  the  pressure  of  group  or  public 


The  Problem  of  Paying  Our  War  Debt    165 

opinion.  Taxation  forces  many  persons  who  are  able 
to  pay  to  do  their  patriotic  duty  whether  they  are 
willing  or  not.  Much  money  that  would  not  come  to 
the  help  of  the  public  voluntarily  is  reached  by  the  strong 
arm  of  the  law  and  drafted  into  the  service  of  the  coun- 
try. There  are  so  many  varieties  of  citizens  that  no 
one  method  of  reaching  all  of  them  is  adequate.  The 
government  must  go  equipped  with  every  possible 
collecting  agency  in  order  to  get,  by  both  persuasion 
and  compulsion  in  their  varied  forms,  all  of  the  enormous 
sums  that  must  be  raised  to  meet  the  pecuniary  out- 
lays of  modern  warfare. 

RIGID   RULES    OF   TAXATION 

The  rigid  rules  of  the  taxing  machinery  have  an  impor- 
tant role  to  play,  though  they  have  limitations  in  their 
effectiveness  in  raising  funds.  These  rules  must  be 
general,  broad  in  application,  and  inelastic  in  execution, 
applying  to  groups  rather  than  to  individual  and  special 
cases.  They  get  with  considerable  effect  whatever 
comes  within  their  scope,  but  much  of  the  country's 
resources  escape  beyond  the  limits  of  these  laws.  To 
reach  the  resources  of  some  would  require  such  rigor 
in  the  law  that  the  burdens  upon  others  would  be  intol- 
erable, and  the  harsh  rules  would  so  interfere  with  the 
free  play  of  business  enterprise  that  the  productive 
efficiency  of  the  country  would  be  reduced.  While 
the  limits  to  the  amounts  that  can  be  raised  by  taxation 
can  be  greatly  widened  by  education  and  experience, 
the  policy  takes  time  and  can  never  hope  to  attain  the 
bond's  ability  to  reach  individual  capacity. 

The    taxgatherer's  task  is  made  easier  in    war-time 


166  Reconstructing  America 

by  the  patriotic  enthusiasm  for  the  support  of  the  fight- 
ing men.  This  war- time  taxpaying  impulse  dies  down 
when  peace  arrives  and  paying  taxes  for  the  discharge 
of  war  obligations  takes  on  the  character  of  paying  for 
a  dead  horse. 

[  There  are  some  types  of  earnings  that  are  war-bred  in 
character,  such  as  excess  or  war  profits  and  incomes 
swollen  through  the  increased  business  activity  due  to 
military  operations  and  the  by-products  of  such  enter- 
prises. These  temporary,  increased  incomes  should 
be  reached  at  once,  because  they  will  not  be  available 
if  time  is  allowed  to  pass.  Prompt,  vigorous  taxation 
of  war  profits  or  excess  profits  due  to  war  business,  direct 
or  indirect,  will  make  it  clear  that  these  gains  are  due 
to  the  general  situation  and  not  to  exceptional  industry 
or  management  on  the  part  of  the  recipients,  and  that 
they  are  not  in  origin  or  character  to  be  regarded  as 
private  property. 

Considerable  difficulty  is  encountered  in  those  cases 
where  businesses  must  be  extended  in  order  to  produce 
supplies  necessary  for  the  conduct  of  the  war.  No 
ordinary  profit  would  justify  the  construction  of  plants 
whose  product  would  be  without  a  market  should  peace 
suddenly  come.  Here  it  would  be  better  not  to  make 
the  extension  on  the  basis  of  a  speculative,  private 
enterprise,  but  to  have  the  government  underwrite  the 
risk  involved  in  the  additional  investment  as  a  public 
expense. 

The  excess-profits  tax  bristles  with  difficulties,  but 
these  must  be  met  in  order  that  the  rich  revenue  it 
will  produce  may  be  secured  in  this  time  of  exceptional 
need. 


The  Problem  of  Paying  Our  War  Debt    167 

THE  RELATION  OF  BONDS  AND  TAXES  IN  DISTRIBUTING 
THE   COST  OF  WAR 

From  what  has  been  said  it  is  evident  that  as  a  matter 
of  practical,  sound  finance  both  bond  sales  and  taxation 
must  be  employed  in  order  to  get  quickly  and  in  adequate 
amount  the  money  needed  to  pay  the  cost  of  war.  The 
debatable  question  is  the  proportion  of  the  income  that 
should  be  raised  by  each  method. 

One  of  the  curious  and  widespread  illusions  respecting 
the  advantage  of  raising  funds  by  borrowing  instead 
of  by  taxation  is  to  the  effect  that  through  the  later 
payment  of  the  loan  part  of  the  money  cost  of  the  war 
will  be  passed  on  to  future  generations.  It  is  evident, 
as  indicated  above,  that  this  generation  furnishes  the 
money  required  for  war  expenses,  whether  it  is  raised 
by  taxation  or  by  bond  sales.  The  taxpayer  gets  back 
a  tax  receipt  while  the  man  who  lends  to  the  govern- 
ment receives  a  bond,  but  both  have  handed  over 
money  to  the  public  treasury.  This  generation  has 
put  up  the  hard  cash.  When  the  bonds  come  due  and 
future  taxpayers  furnish  the  money  to  pay  the  obliga- 
tions, to  whom  is  the  money  paid?  To  this  generation 
which  gave  the  government  money  for  the  bonds? 
Assuredly  not.  This  generation  will  have  gone  to  its 
reward  by  that  time  and  the  taxpayers  of  the  next 
generation  will  pay  the  bondholders  of  the  next  gener- 
ation, not  the  bond  buyers  of  this  generation.  As  long 
as  the  problem  is  considered  from  the  point  of  view  of 
the  mass  of  the  people  described  as  "this  generation" 
as  contrasted  with  future  generations,  there  is  no  doubt 
that  "this  generation"  must  furnish  the  men,  materials, 


168  Reconstructing  America 

and  money  needed  to  win  the  war  and  that  it  will  be 
impossible  for  the  people  of  to-day  to  collect  anything 
in  return  from  the  people  of  to-morrow.  .  .  . 

For  the  purpose  of  illustration  let  us  suppose  that 
(i)  the  entire  cost  of  the  war  were  met  by  selling  bonds 
and  (2)  that  all  citizens  were  able  to  buy  the  same  num- 
ber of  bonds  and  (3)  that  the  bonds  were  eventually 
to  be  paid  for  by  a  poll  tax  of  so  much  a  head,  assuming 
"  that  all  other  things  remain  the  same."  If  each  citizen 
bought  a  $1,000  bond  and  later  paid  $1,400  in  poll 
taxes  to  cover  the  interest  and  principal  of  the  bonds, 
the  effect  would  be  essentially  the  same,  apart  from  the 
cost  of  administration,  as  if  the  burden  had  been  met 
by  taxes  during  the  war.  Each  citizen  would  have 
given  up  at  once  $1,000  in  either  case,  receiving  a  bond 
in  one  instance  and  a  tax  receipt  in  the  other.  Were 
the  bond  method  chosen  the  government  later  would 
reach  into  the  bondholder's  right-hand  pocket  for  taxes 
and  pay  into  his  left-hand  this  same  money  as  interest 
and  principal.  If  the  bonds  ran  for  a  long  time  the 
same  relation  between  taxpayers  and  bondholders  would 
continue ;  paying  and  receiving  would  balance  each 
other.  There  would  be  no  choice  between  bonds  and 
taxes  as  methods  of  raising  money. 

If  the  bonds  were  unpaid  for  fifty  years  and  the  genera- 
tion of  buyers  passed  away  and  a  new  generation  in- 
herited the  bonds  and  the  obligation  to  pay  taxes,  the 
case  would  not  be  altered.  This  earlier  generation  would 
have  turned  over  the  money  to  the  government  and 
passed  on  the  bonds  to  its  heirs,  who  would  pay  off  the 
bonds  with  taxes,  but  this  earlier  generation  would 
get  none  of  the  money.  The  future  taxpayers  would 


The  Problem  of  Paying  Our  War  Debt    169 

pay  the  future  bondholders  and  in  this  supposed  case 
no  one  would  be  ahead  or  behind,  seeing  that  bondhold- 
ing  and  taxpaying  are  assumed  to  be  equal  for  every 
citizen.  The  original  bond  buyers  might  as  well  have 
paid  taxes  as  bought  bonds.  It  is  of  no  particular 
advantage  to  pass  to  one's  heirs  an  asset  like  a  bond  if 
it  is  accompanied  by  the  equal  liability  to  pay  taxes. 

This  supposition  of  equal  power  to  buy  bonds  and 
pay  taxes  is  too  far  removed  from  reality  to  serve  for 
more  than  an  illustrative  point  of  departure.  Imagine 
that  the  citizens  are  classed  in  groups  according  to  their 
ability  to  buy  bonds,  e.  g.,  in  the  relation  of  i,  5,  10, 
15,  25,  etc.,  and  that  they  are  assessed  for  taxes  in  a 
similar  ratio.  This  might  be  nearer  the  real  situation, 
but  it  is  still  evident  that  they  would  have  to  give  up 
the  price  of  the  bonds  at  once  upon  buying  them,  and 
that  later  they  would  be  taking  out  of  one  pocket  to 
pay  taxes  the  money  which  would  be  returned  to  the 
other  as  interest  and  principal  on  the  bonds,  leaving 
them  neither  richer  nor  poorer. 

These  suppositions  are  intended  to  illustrate  what 
is  perhaps  evident  upon  mere  statement,  that  there  is  no 
advantage  to  the  individual  in  the  policy  of  public 
borrowing  rather  than  in  pay-as-you-go  taxation  if  his 
purchase  of  bonds  as  an  investment  is  matched  by  an 
obligation  to  pay  taxes  later  in  proportion  to  his  hold- 
ings of  bonds.  He  might  as  well  accept  a  tax  receipt 
at  once  for  his  money  as  to  get  a  bond  that  he  must 
later  pay  off  himself  by  turning  over  money  for  tax 
receipts.  He  gives  up  cash  at  once  in  both  cases  and 
his  later  income  from  coupons  and  final  payment  when 
the  bond  system  is  adopted  are  matched  by  his  payments 


170  Reconstructing  America 

of  taxes.  When  later  taxation  is  proportioned  to  bond 
purchases  it  is  an  illusion  to  think  of  the  bond  as  worth 
more  than  a  tax  receipt.  All  of  this  is  based  on  the 
assumption  that  the  purchaser  of  the  bond  holds  it 
until  maturity  or  passes  it  on  to  his  heirs. 

But  it  may  be  objected  that  the  bondholders  can 
sell  their  bonds,  whereas  there  is  no  market  for  tax 
receipts.  If  the  money  were  reinvested,  the  new  income 
would  be  reached  by  our  supposed  system  of  taxation 
according  to  ability.  If  the  price  received  from  the 
sold  bonds  were  used  in  untaxed  consumption,  the  seller 
would  be  in  the  group  indicated  later  who  would  find 
advantage  in  the  system  of  public  borrowing  rather  than 
in  taxation. 

TAXES  BETTER  THAN  BONDS 

There  is  no  escape  from  the  conclusion  that  if  the 
people  generally  buy  bonds  according  to  their  ability 
and  are  taxed  according  to  their  ability  to  pay  the 
interest  and  principal  of  the  bonds,  there  is  no  advantage 
to  any  one  in  the  purchase  of  bonds  rather  than  the 
payment  of  taxes  during  the  war.  .  .  . 

The  persons  who  would  gain  directly  by  the  bond  sys- 
tem would  be  chiefly  the  ones  for  whom  postponed  taxa- 
tion would  mean  escaped  taxation :  the  recipients  of 
war  profits  or  enlarged  incomes  during  the  war,  the 
citizens  who  would  be  saved  from  consumption  taxes 
during  war  and  thus  be  able  to  buy  commodities  cheaper, 
those  who  would  be  able  to  escape  their  proportional 
burden  through  the  character  of  the  tax  system  adopted 
after  the  war.  .  .  . 

Bonds  are  an  investment  to  all  those  who  do  not  later 


The  Problem  of  Paying  Our  War  Debt    171 

have  to  pay  taxes  or  a  proportionate  share  of  taxes 
to  meet  the  interest  and  principal.  To  all  others  they 
are  the  means  through  which  patriots  may  contribute 
to  the  support  of  the  war  and  later  wipe  the  slate  clean 
by  putting  money  into  the  government's  vaults  in 
paying  taxes  and  drawing  it  out  again  by  cashing  coupons 
and  eventually  receiving  the  face  of  the  bonds.  .  .  . 

The  outstanding  conclusion  in  this  consideration  of 
some  of  the  principles  of  war  finance  is  that  the  costs 
of  war  in  men,  material,  and  money  are  present  costs 
that  cannot  be  saddled  on  the  future. 

PAY-AS-YOU-GO   TAXATION   BEST 

Pay-as-you-go  taxation  is  the  logical  way  to  carry  the 
present  money  cost,  but  it  is  impracticable  as  the  sole 
method  because  it  does  not  yield  fast  enough  and  has 
never  been  sufficiently  developed  to  reach  fully  indi- 
vidual capacity  to  pay.  It  must  be  combined  with 
bond  sales  to  get  at  once  the  desired  results.  The 
latter  yield  large  sums  because  of  their  appeal  to  pa- 
triotism and  personal  profit.  The  latter  idea  of  an 
investment  with  a  net  return  is  true  for  the  individual 
when  the  bondholder  is  not  obliged  to  pay  proportionate 
taxes  later  for  the  redemption  of  the  bond.  In  case 
he  must  do  so  the  bond  is  not  in  reality  superior  to  a 
tax  receipt  gotten  at  once,  though  it  does  rank  with 
any  other  investment  whose  returns  are  destined  to 
pay  taxes,  and  all  investments  now  being  made  are 
likely  subjects  for  future  taxation.  However,  the 
future  is  so  uncertain  and  the  general  run  of  citizens 
so  little  given  to  looking  forward  that  most  people 
regard  the  bond  as  an  investment.  As  a  result  the 


172  Reconstructing  America 

psychological  strain  of  raising  huge  sums  is  greatly 
reduced. 

The  bond  method  in  addition  allows  more  latitude 
in  the  adjustment  of  taxation  in  and  after  the  war  than 
would  be  possible  in  case  all  expenses  were  paid  by 
taxation  during  the  conflict.  This  possibility  of  redis- 
tributing the  financial  cost  of  the  war  among  different 
persons  by  the  particular  system  of  taxes  adopted  makes 
it  important  to  give  attention  to  the  types  of  taxation 
chosen  both  during  hostilities  and  when  peace  comes, 
in  order  to  make  the  whole  scheme  meet  the  demands  of 
equity  and  justice. 

The  presumption  in  favor  of  vigorous  taxation  in 
war  time  is  strengthened  by  the  patriotic  willingness 
to  pay  taxes  while  the  struggle  is  on,  by  the  increased 
ability  to  pay  of  many  with  enlarged  incomes,  by  the 
temporary  character  of  some  of  these  larger  incomes 
that  makes  it  desirable  that  they  be  reached  at  once, 
by  the  fact  that  returning  soldiers  should  not  be  com- 
pelled to  face  heavy  taxation  to  pay  interest  and  prin- 
cipal of  bonds  owned  by  civilians,  by  the  probability 
that  in  many  cases  taxation  is  more  effective  than  bonds 
in  leading  people  to  save,  and  finally  that  bonds  are 
likely  to  be  the  basis  of  inflated  credit  which  will  raise 
prices,  while  their  excessive  issue  with  the  necessary 
higher  rate  of  interest  will  introduce  a  disturbing  factor 
in  the  field  of  savings  and  investment. 

The  sum  of  these  considerations  of  war  finance  is 
this :  the  largest  practicable  portion  of  war  expenses 
should  be  carried  by  taxation  while  the  war  is  being 
fought,  and  the  issue  of  bonds  be  kept  within  the  limits 
set  by  necessity. 


The  Problem  of  Paying  Our  War  Debt    173 

III 

How  WE  MUST  PAY  COSTS  OF  WAR 

BY  PROFESSOR  IRVING  FISHER 

Of  Yale  University 

In  the  special  report  of  the  American  Economic 
Association's  Committee  on  Purchasing  Power  of  Money 
in  Relation  to  the  War,  headed  by  Professor  Fisher, 
the  proposition  is  advanced  as  the  starting  point  of 
the  investigation  that  "the  whole  cost  of  waging  the 
war  falls  necessarily  on  this  generation  alone,  and  can- 
not be  shifted  to  the  next  by  loans  or  any  other 
device."  And  the  Report  goes  on  : 

No  one  doubts  this  when  the  money  is  paid  as  taxes. 
But  even  when  the  money  is  paid  as  loans,  the  same 
principle  holds  true ;  for  the  next  generation  can  never 
reimburse  the  present  generation.  It  can  only  reim- 
burse itself.  When  our  descendants  pay  back  the 
billions  "borrowed"  to-day  to  carry  on  the  war  they  are 
simply,  as  taxpayers,  paying  them  back  to  themselves, 
as  bondholders.  The  money  simply  goes  out  of  one 
pocket  into  another. 

Some  people  are  afraid  that  great  loans  will  saddle 
the  future  with  a  crushing  burden  of  taxes.  We  might 
just  as  well  talk  of  great  loans  as  a  means  of  enriching 
the  next  generation  by  what  their  bonds  will  bring  in  to 
them.  It  is  exactly  as  broad  as  it  is  long.  That  is 
a  chief  reason  why,  after  the  war,  a  nation  recuperates 
so  fast.  When  war  is  over  the  cost  of  waging  it  is 
over,  too. 

Future  generations  will  be  saddled,  not  with  the  bur- 


174  Reconstructing  America 

den  of  paying  for  the  war,  but  with  the  burden  of  disease, 
of  shattered  men,  destroyed  lands,  forests,  mines,  and 
factories  for  which  the  havoc  of  war  is  responsible,  i 
It  is  when  we  view  the  distribution  of  the  burden  among 
individuals  and  among  classes  that  the  differences 
between  loans  and  taxes  begin  to  appear. 

If  you  subscribe  to  war  bonds  beyond  your  share 
of  the  burden  to-day,  your  son  or  grandson  may  receive 
more  as  bondholder  than  he  pays  as  taxpayer.  Thus 
if  the  rich  finance  the  war  by  bonds,  and  if  taxes  after 
the  war  fall  largely  on  the  poor,  the  descendants  of 
the  rich  may  live  on  the  interest  and  principal  of  bonds, 
paid  by  the  poor.  This  is  a  way  by  which,  in  the  past, 
wars  have  often  been  financed. 

The  opposite  situation  is  possible,  however,  and  is 
to-day  actually  more  likely  than  ever  before  in  history. 
The  poor  of  this  generation  are  buying  many  bonds ; 
and  in  the  next,  the  rich  will  probably  be  heavily  taxed, 
and  so  contribute  to  the  millions  of  inheritors  of  small 
bonds. 

COST   SHOULD   BE   PAID   FROM   SAVINGS 

The  important  thing  is  not  whether  the  tax  policy 
or  the  loan  policy  is  most  used.  The  important  thing 
is  that  the  cost  of  the  war  should  be  paid  as  far  as  possible 
out  of  conscious  savings  and  not  out  of  borrowings. 
While  a  heavy  tax  policy  helps  toward  this  end,  it 
could  never  of  itself  achieve  it.  The  public  should 
understand  that  lending  by  borrowing,  though  much 
better  than  nothing,  is  still  a  very  unsatisfactory  way 
to  help  the  Government.  By  raising  prices  such  a 
procedure  tends  to  shift  the  cost  of  the  war  to  the  poor, 


The  Problem  of  Paying  Our  War  Debt    175 

who  pay  it  in  a  higher  cost  of  living.  Some  organized 
public  policy  is  needed  to  guide  the  distribution  of 
banking  accommodations  and  the  expansion  of  credit, 
so  as  to  avoid  hampering  the  industrial  and  financial 
machinery  and  at  the  same  time  avoid  inflation.  The 
danger  is,  however,  that  expansion  may  be  carried  too 
far,  rather  than  that  taxation  will  be  made  too  drastic. 


CHAPTER  IX 

BUSINESS  AND   FOREIGN  TRADE  AFTER  THE  WAR 

I 

THE  FOREIGN  TRADE  OUTLOOK 

BY  JAMES  A.   FARRELL 

Chairman  National  Foreign  Trade  Council 
President  United  States  Steel  Corporation 

THE  remark  has  become  commonplace  that  one  of 
the  most  notable  results  of  the  Great  War  was  to  stimu- 
late the  interest  of  American  manufacturers  and  mer- 
chants in  foreign  trade.  But  to  understand  the  bearing 
of  such  a  statement  on  present  conditions,  it  is  necessary 
that  it  should  be  placed  in  its  proper  setting.  Before  the 
war  a  concerted  movement  was  already  well  under  way 
to  lend  a  new  vitality  to  American  competition  in  the 
markets  of  the  world.  The  immediate  prompting  for 
that  movement  was  the  effort  to  discover  a  means  of 
relief  for  the  depression  which  then  existed  in  most  of 
our  staple  industries.  It  was  a  time  when  the  activity 
of  American  manufacturing  production  was  sensibly 
retarded ;  there  was  a  large  and  steadily  growing 
mass  of  unemployment,  beside  a  very  extensive  stoppage 
of  machinery.  A  steady  increase  of  foreign  trade, 
which  had  begun  in  1908,  had  been  arrested.  Exports 
in  1914  had  fallen  below  the  level  of  1913,  while  imports 
had  increased.  When  the  first  National  Foreign  Trade 

176 


Foreign  Trade  After  the  War         177 

Convention  met,  in  May,  1914,  the  keynote  of  the  pro- 
ceedings was  the  relief  of  adverse  domestic  conditions 
by  the  opening  of  new  markets  abroad  for  the  products 
of  American  workshops.  This  was  the  purpose  for 
which  the  National  Foreign  Trade  Council  had  been 
founded,  and  on  whose  pursuit  all  its  efforts  were  con- 
centrated. Circumstances  then  unforeseen  promptly 
changed  the  whole  aspect  of  our  foreign  commerce. 
The  war  restored  prosperity  to  the  United  States. 
Abnormal  demands  and  prices  for  munitions,  foodstuffs, 
and  raw  materials  accelerated  the  pace  of  industry 
and  recalled  idle  hands  to  the  forge.  Within  two  years 
after  the  country  emerged  from  the  shadow  of  impend- 
ing depression,  the  annual  excess  of  exports  over  imports 
had  gone  above  two  billion  dollars ;  the  increase  in 
domestic  trade  had  risen  ten  times,  and  that  of  foreign 
trade  seven  times  over  the  established  yearly  increase 
before  the  war.  .  .  . 

In  the  last  normal  year,  1913,  the  exports  of  the  United 
States  were  valued  at  $2,448,000,000,  of  which  68  per 
cent  was  made  up  of  raw  and  partly  manufactured 
products,  and  32  per  cent  of  fully  manufactured  articles. 
Of  the  $772,000,000  which  constituted  the  32  per  cent 
of  manufactured  exports  in  1913,  it  is  significant  that 
$430,000,000,  or  nearly  60  per  cent,  came  under  the 
three  classifications  of  "agricultural  implements,"  "min- 
eral oil"  and  "iron  and  steel,"  the  three  lines  of  industry 
built  up  by  large  corporations  based  upon  the  principle 
of  cooperation  and  the  command  of  sufficient  capital, 
resources,  and  ability  to  withstand  initial  losses  compa- 
rable to  the  cartels  and  cooperative  selling  organizations 
of  Europe.  The  influences  that  favored  our  competitors 


178  Reconstructing  America 

in  foreign  trade  had  been  labor  supply,  capital  supply, 
experience  in  industry  and  world  trade,  and  the  prestige, 
good  will,  and  facilities  of  an  established  business.  But 
in  the  group  of  industries  referred  to  we  had  evidently 
become  sufficiently  strong  to  meet  the  most  highly  devel- 
oped forms  of  competition  in  foreign  markets  on  equal 
terms. 

THE   TASK  BEFORE   US   TO-DAY 

The  task  before  us  to-day  in  respect  to  foreign  trade 
expansion  is  not  so  much  to  convince  as  to  advise  and 
guide.  Entrance  into  foreign  trade  is  no  longer  a  matter 
of  choice  with  us.  Everybody  in  these  times  is  ready 
to  concede  the  significance  of  the  fact  that  the  American 
industries  presenting  the  most  nearly  unbroken  record 
of  prosperity  and  sustained  labor  employment  are  those 
which  have  been  accustomed  regularly  to  market  over- 
sea from  10  to  35  per  cent  of  their  products.  Most 
men  who  think  on  the  subject  at  all  are  prepared  to  go 
a  step  further  and  to  concede  that  the  production  of 
commodities  upon  a  competitive  basis  of  cost,  in  amounts 
sufficient  to  supply  home  consumption  and  furnish 
material  for  foreign  trade,  will  be  the  basis  of  our  future 
national  strength  and  prosperity.  On  the  money  side, 
there  is  equal  readiness  to  agree  that  strength  of  finance 
will  count  for  even  more  than  it  has  ever  done  before 
in  the  development  of  external  commerce.  An  eminent 
banking  authority  sums  up  the  matter  by  saying  that 
in  the  coming  expansion  of  world-wide  enterprise,  the 
nation  that  can  not  only  give  its  own  trade,  on  both 
the  import  and  the  export  side,  the  benefit  of  complete 
financial  organization  and  stability,  but  can  extend  to 


Foreign  Trade  After  the  War         179 

other  nations  the  benefit  of  capital  and  commercial 
credits,  will  be  at  a  great  advantage  over  any  nation 
that  happens  to  have  its  hands  full  in  maintaining  its 
own  equilibrium,  or  which  cannot  spare  capital  and 
credit. 

More  than  this,  there  can  be  no  great  revival  of  trade 
in  the  countries  where  we  hope  for  it  most,  unless  we  are 
ready  to  provide  capital  for  their  development.  We 
must  enter  into  the  industrial  life  of  those  countries, 
engage  in  enterprises  with  them,  and  create  out  of  their 
resources  the  new  wealth  from  which  will  come  our  pay. 
Habits  of  investment  are  acquired  by  experience,  and 
conditions  in  this  country  have  favored  investments 
outside  of  the  country ;  and  the  development  among  us 
of  a  body  of  cosmopolitan  investors,  such  as  has  long 
existed  in  England,  must  vitally  affect  the  future  of 
our  foreign  trade.  It  means,  however,  an  enormous 
stride  in  commercial  and  industrial  capacity  that  we 
should  have  passed  out  of  the  ranks  of  the  debtor  na- 
tions, and  become  ourselves  large  creditors  of  all  the 
Allied  countries.  Then,  too,  a  very  important  con- 
tribution has  been  made  to  the  financial  education  of 
our  people  in  the  new  familiarity  which  the  bond  sub- 
scriptions have  given  them  with  investment  in  securities. 
It  is  sufficiently  plain  that  our  commercial  banks  can- 
not properly  tie  up  the  deposits  of  their  customers  in 
stocks  and  bonds  of  foreign  corporations,  no  matter 
how  good  they  may  be,  and  that  any  such  form  of 
investment  is  beyond  the  power  of  the  savings  banks. 
We  must,  therefore,  look  to  private  investors  to  assure 
the  broad  and  deep  foundation  on  which  must  be  reared 
the  American  foreign  commerce  of  the  near  future. 


180  Reconstructing  America 

II 

REBUILDING  OUR  FOREIGN  TRADE 

BY  HON.  WILLIAM   C.   REDFIELD 

Secretary  of  Commerce 

As  far  and  fast  as  we  may  we  must  set  our  commerce 
free  from  all  restrictions  and  look  toward  a  great  and 
growing  domestic  and  foreign  trade.  The  viewpoint 
of  the  Department  of  Commerce  toward  this  matter 
is  shown  in  the  fact  that  at  its  request  it  is  given,  in  a 
pending  bill,  double  the  funds  for  commercial  work 
it  has  ever  had.  Business  men,  whether  public  or 
private,  must,  however,  consider  actual  facts  in  planning 
both  the  time  and  the  extent  of  their  trade  efforts. 
Facts  are  stubborn  things.  Impatience  alone  will  not 
remove  them;  earnest  and  patient  effort  may  do  so. 
Some  trade  restrictions  arising  from  blockade  are  in- 
volved in  the  substance  of  the  armistice  itself  and  can 
only  be  met  by  concurrent  action,  and  must  also,  when 
relaxed,  be  relaxed  for  those  who  have  been  our  foes 
as  well  as  for  ourselves  and  our  associates.  Others  are 
matters  of  contract  but  also  require  concurrent  action, 
so  that  we  cannot  move  by  ourselves.  These,  too, 
involve  the  time  and  the  extent  when  restrictions  shall 
be  removed  from  our  enemies.  The  movement,  how- 
ever, on  all  sides  is  happily  toward  freedom  of  action. 

There  are  those  who  seem  to  think  that  the  commerce 
of  the  United  States  has  two  distinct  parts  which  have 
little  in  common.  They  speak  of  foreign  commerce 
and  of  domestic  commerce  as  separate  and  even  at 
times  as  almost  antagonistic.  We  are  by  some  urged 


Foreign  Trade  After  the  War         181 

to  give  less  thought  to  foreign  trade  and  more  to  domes- 
tic trade  and  have  been  criticized  for  so  far  ignoring 
the  greater  and  caring  so  much  for  the  less.  Apart, 
however,  from  the  fact  that  we  operate  under  law  and 
by  appropriations  which  are  laws  and  may  not  be  diverted 
from  their  scope  to  another  purpose,  however  good,  the 
criticism  involves  a  basic  misapprehension.  Foreign 
commerce  and  domestic  commerce  are  not  two  and  sepa- 
rate but  one  and  the  same,  though  under  different  phases. 
The  distinction  between  them  is  superficial ;  their 
union  is  real.  No  foreign  order  can  come  to  this  country 
without  involving  some,  perhaps  many,  transactions 
in  domestic  trade.  Wages  paid  for  work  on  goods 
sold  abroad  are  expended  in  domestic  business.  Ma- 
terials manufactured  for  foreign  sales  come  from  domes- 
tic producers.  The  foreign  commercial  field  is  the 
friend  and  supporter  of  the  domestic  commercial  field. 
One  cannot  as  a  matter  of  economic  fact  promote  domes- 
tic commerce  without  in  so  doing  promoting  foreign 
commerce.  One  cannot  in  truth  promote  foreign  com- 
merce without  thereby  aiding  domestic  commerce. 
Nations  do  not,  indeed  cannot,  live  unto  themselves 
alone.  The  man  or  the  nation  that  is  self-centered 
fails  of  his  high  calling.  We  may  not  in  foreign  trade 
or  in  domestic  policy  be  keepers  merely  of  ourselves. 
Experience  and  economics  as  well  as  ethics  answer 
affirmatively  the  question  "Are  nations  their  brothers' 
keepers?"  It  was  characteristic  of  American  energy 
that  when  the  President  announced  the  close  of  active 
military  operations  through  the  signing  of  the  armistice 
many  in  our  land  jumped  to  the  conclusion  that  the 
war  was  over  and  that  all  that  was  necessary  was  to 


182  Reconstructing  America 

take  up  the  threads,  go  ahead  and  readjust  quickly, 
get  busy,  get  results.  A  program  of  readjustment  was 
suggested  and  we  were  to  push  ahead  with  business  as 
usual.  These  ardent  spirits,  whose  energy  is  not  to  be 
abused,  for  it  is  that  which  has  created  America  and 
won  the  war,  forgot  however  certain  facts  which  made 
their  ardor  unpractical.  In  the  sense  of  military  opera- 
tions the  war  was  over;  in  the  sense  of  war  problems, 
war  limitations,  war  difficulties,  war  responsibilities, 
it  was  not  over  and  is  not  over  yet. 

Take  the  problem  of  food,  strictly  a  war  result  and  a 
war  problem ;  it  is  more  pressing  to-day  than  ever,  more 
restrictive  in  its  effect  upon  the  pulse  of  commerce 
because  of  its  demands  on  ships.  It  does  not,  indeed, 
come  to  our  breakfast  table  and  say  as  it  did,  "Eat 
less  that  others  may  have  to  eat, "  because  following  wise 
leadership  the  country  has  produced  enough  for  ourselves 
and  to  spare  for  others.  But  this  very  abundance  presses 
hard  upon  the  tools  we  have  available  to  do  the  work  of 
transporting  and  distributing,  and  the  very  volume  of 
this  abundance  calls  for  special  efforts  in  financing. 

THE   PROBLEM   OF   CREDITS 

Consider  well  the  problem  of  credits.  We  are  the 
great  unexhausted  reservoir  of  finance,  but  if  we  are 
at  one  and  the  same  time  to  finance  a  great  revival  of 
trade  at  home  and  a  large  part  of  the  necessary  recon- 
struction abroad,  may  there  not  be  a  question  whether 
this  tool  of  trade  will  not  be  overstrained  to  do  all  the 
work  required  of  it?  The  apostles  of  hurry  should 
remember  that  conditions  seem  to  be  such  that  we  who 
would  trade  must  also  furnish  the  means  to  pay  the 


Foreign  Trade  After  the  War         183 

bills,  and  this  not  for  ourselves  alone  but  for  others  as 
well.  This  is  a  new  problem,  a  war  problem,  a  novel 
responsibility,  but  very  real.  Our  brethren  overseas 
are  doing  their  best  to  care  for  themselves. 

A  FLOOD   OF  ANARCHY 

We  must  remember  also  that  the  possible  problems 
of  force  are  not  wholly  gone.  Germany  seems  in  chaos ; 
Russia  we  know  is  so.  Who  will  say  to-day  what  is 
the  future  of  Bolshevism?  Voices  are  raised,  indeed, 
to  say  we  have  nothing  to  do  with  Russia,  and  perhaps 
it  is  not  wrong  to  infer  that  they  would  argue  we  have 
nothing  to  do  with  the  internal  forces  of  what  is  to  be 
the  new  Germany.  We  have  been  fighting,  however, 
the  battle  of  freedom  against  autocracy ;  are  we  sup- 
posed therefore  to  have  no  concern  in  the  battle  of 
freedom  against  possible  anarchy?  Is  it  meant  that 
we  can  withdraw  like  the  turtle  within  his  shell  or  like 
the  ostrich  bury  our  heads  in  the  sand?  Can  we,  dare 
we,  permit  a  flood  of  anarchy,  if  it  will  be  such,  to  sweep 
over  central  as  well  as  eastern  Europe  to  threaten  the 
peoples  who  have  fought  by  our  side,  and  if  this  is  done 
then  certainly  later  to  threaten  us?  Who  can  answer 
the  question  whether  it  would  be  wise  or  even  safe  now 
to  reduce  ourselves  to  comparative  military  weakness 
until  we  know  more  of  the  nature  and  purpose  of  the 
forces  which  have  overwhelmed  one  empire  and  threat- 
ened the  successor  of  another? 

THE   NEW-BORN   NATIONS 

We  must  consider  also  that  the  newly  born  nations 
which  have  been  created  amid  the  storm  of  war  are  but 


184  Reconstructing  America 

barely  born.  Their  exact  boundaries  are  in  some  cases 
yet  undefined,  their  organization  far  from  complete. 
They  are  not  now  able  to  buy  largely.  They  need  time 
and  definition  and  formal  welcoming  into  the  family 
of  nations  and  the  establishing  of  credits  before  they 
can  become  large  markets.  The  status  of  Syria,  Meso- 
potamia, and  Armenia  hangs  in  a  still  uncertain  balance. 
In  planning  for  commerce  with  these  countries  we  shall 
do  well  to  recall  that  "All  things  come  to  him  who  will 
but  wait."  Meanwhile  the  actual  work  of  reconstruc- 
tion goes  ahead. 

Nevertheless  it  is  important  that  we  have,  both  now 
and  in  the  future,  work  to  do  for  labor  and  for  factory, 
and  that  we  look  wherever  we  may  for  markets  at  home 
and  abroad.  It  is  for  this  purpose  that  the  Department 
of  Commerce  exists.  Its  organization  at  home  and 
abroad  is  complete.  It  will  need  the  motive  power 
of  sufficient  appropriations.  Without  these  it  will 
be  all  but  helpless.  It  has  asked  Congress  for  much 
larger  sums  than  have  ever  been  given  to  it  in  the  past, 
and  it  hopes  and  believes  that  it  will  secure  favorable 
consideration  for  its  requests.  There  arc  three  forms 
its  commercial  activities  are  expected  to  take :  The 
promotive  abroad,  the  scientific  at  home,  the  coopera- 
tive at  home.  The  first  two  are  now  being  greatly 
expanded.  The  third  is  new,  a  valuable  legacy  from 
the  War  Industries  Board. 

HOW   THE    GOVERNMENT   HELPS    BUSINESS 

Our  promotive  work  lies  in  the  hands  of  the  Bureau 
of  Foreign  and  Domestic  Commerce.  This  service 
maintains  a  foreign  force  of  its  own  and  works  in  close 


Foreign  Trade  After  the  War         185 

cooperation  with  the  Consular  Service.  The  two  com- 
bined provide  in  every  important  country  a  threefold 
force  which  may  be  termed  a  general  fixed  force,  a  local 
fixed  force,  and  a  traveling  force.  The  first  consists 
of  the  commercial  attaches,  officers  of  the  Department 
of  Commerce,  with  a  general  outlook  upon  the  commerce 
of  the  nation  to  which  they  are  assigned.  They  have 
nothing  but  commercial  duties  to  perform.  They  aid 
and  are  helped  by  the  presiding  officers  of  the  Consular 
Service,  with  whom  it  is  our  earnest  purpose  they  should 
cooperate ;  and  they  are  also  the  commercial  assistants 
to  our  Ministers  and  Ambassadors,  who  have  repeatedly 
acknowledged  the  value  of  their  services.  What  I  have 
called  the  local  fixed  force  comprises  the  consuls,  under 
the  Department  of  State.  They  are  settled  at  local 
points  with  fixed  areas.  In  these  they  perform  many 
other  duties  besides  commercial  ones.  They  are  thus 
necessarily  limited  in  area  to  their  district,  in  scope 
by  the  legal  requirements  to  give  other  matters  than 
commerce  much  of  their  time  and  thought.  They  keep 
offices.  The  work  done  by  these  officers  is  of  fine  and 
increasing  value.  They  are  an  important  and  productive 
element  in  the  foreign  commercial  force  of  the  Govern- 
ment. The  traveling  force  is  composed  of  trade  com- 
missioners. Two  representatives  are  present.  They 
take  special  subjects  or  lines  of  business  and,  being 
familiar  with  them  at  home,  study  them  in  different 
countries  or  in  groups  of  countries  abroad,  report  upon 
them  while  in  the  field,  and  on  their  return  make  both 
oral  and  written  reports  which  reach  alike  individuals, 
business  houses,  and  the  general  public. 

This  threefold  foreign   service  is  matched  by  a  do- 


186  Reconstructing  America 

mestic  one  which  covers  the  entire  country  with  seven 
district  offices  and  seven  cooperating  offices  through 
chambers  of  commerce,  and  is  aided  by  a  continued 
series  of  publications,  one  of  them  daily,  which  both  by 
countries  and  by  subjects  make  the  information  avail- 
able to  all  who  desire  it.  It  is  a  matter  of  constant 
occurrence  that  business  houses  and  organizations  at 
much  expense  seek  abroad  information  which  is  avail- 
able for  them  without  cost  and  on  demand  in  Wash- 
ington. Every  effort  is  made,  short  of  direct  advertising 
which  is  not  permitted,  to  inform  the  business  public 
that  to-day  there  are  organizations  doing  for  pay  some 
of  that  work  which  we  freely  do,  and  the  business  world 
does  not  as  yet  avail  itself  as  it  might  of  our  service. 
The  demands,  however,  press  us  hard  and  we  are  enlarg- 
ing our  force  and  facilities  to  meet  them.  Broadly,  the 
fact  is  that  this  free  commercial  service  covers  the 
whole  earth  and  is  so  flexible  that  it  can  cover  the  widest 
needs  of  American  commerce ;  its  extent  depends  solely 
upon  the  funds  provided.  We  have  been  compli- 
mented by  having  the  organization  and  effectiveness 
of  this  service  commended  by  our  foreign  competitors 
and  followed  by  them  in  their  own  work. 

SCIENCE   AIDS    INDUSTRY 

The  scientific  world  on  behalf  of  commerce  and  indus- 
tries centers  in  the  Bureau  of  Standards,  with  certain 
interesting  specific  instances  in  the  Bureau  of  Fisheries. 
Of  this  latter  we  may  briefly  say  that  it  has  aided  the 
development  of  a  new  leather  supply  from  aquatic 
sources  through  which  the  shark,  the  ray,  and  other 
unused  fishes  have  become  of  economic  value.  It 


Foreign  Trade  After  the  War        187 

sustains  the  pearl-button  industry  by  maintaining  the 
supply  of  raw  material  and  has  created  in  this  country 
the  industry  of  dressing,  dyeing,  and  finishing  seal  furs 
and  other  fur  skins.  The  Bureau  of  Standards  offers 
to  the  industries  of  America  that  scientific  support 
which  Germany  has  given  hers,  but  which  we  have 
hitherto  lacked.  Its  great  research  laboratories  are 
finely  equipped,  and  its  experienced  staff  is  competent 
and  eager  to  aid  industry.  It  seems  commonplace  to 
say  that  the  basis  of  industry  is  accurate  knowledge, 
but  this  truism,  as  it  seems,  has  not  been  true  as  a 
whole  of  the  industries  of  America  in  the  sense  of  their 
having  accurate  scientific  research  into  their  own  affairs 
available  for  them.  When  chemistry  entered  the 
steel  business  so-called  practical  men  objected,  and  the 
man  of  science  has  not  always  been  welcome  in  American 
factories,  with  some  fine  exceptions.  Our  industries 
are  coming  to  see  their  need  of  scientific  research.  Some 
of  them  know  from  experience  how  fruitful  it  is.  The 
Bureau  of  Standards,  released  from  its  intense  war 
activities,  offers  an  opportunity  of  helpfulness  in  this 
direction,  having  built  and  equipped  great  laboratories 
with  that  largely  in  view,  and  welcomes  an  opportunity 
to  cooperate  with  the  technical  men  of  the  industrial 
world  in  mutual  helpfulness. 

VALUE    OF   THE    DEPARTMENT   OF   COMMERCE 

The  cooperative  service  consists  of  two  branches  — 
that  which  is  called  directly  the  Industrial  Cooperation 
Service  and  the  Waste  Reclamation  Service.  These 
are  valuable  legacies  from  the  War  Industries  Board 
intended  to  continue  under  peace  conditions  much  of 


188  Reconstructing  America 

what  was  well  done  during  war.  Their  purpose  is  to 
standardize  on  the  commercial  side  as  the  Bureau  of 
Standards  does  on  the  scientific  side,  to  do  away  with 
wasteful  and  hurtful  trade  practices,  to  eliminate  unneces- 
sary sizes,  styles,  and  varieties  of  goods,  to  learn  and 
strengthen  industrial  weaknesses.  Its  purpose  is  flexible 
and  is  as  wide  as  the  needs  of  industry.  It  has  no 
compulsory  powers,  but  operates  through  common 
counsel.  It  is  in  touch  with  business  organizations 
and  has  at  its  command  the  advice  of  the  gentlemen 
who  were  the  heads  of  the  various  divisions  of  the  War 
Industries  Board  during  the  war  and  represented  great 
industries  therein.  The  Waste  Reclamation  Service, 
a  sister  legacy  from  the  War  Industries  Board,  has  had 
great  success  in  the  salvaging  of  wasted  materials,  and 
our  plan  is  to  continue  that  work  in  cooperation  with 
numerous  national  societies  and  with  the  officers  of 
municipalities  all  through  the  land.  It  would  not  be 
outside  reason  to  think  that  the  continued  operation 
of  this  single  service  may  readily  return  to  the  country 
many  times  annually  the  entire  cost  of  the  whole  De- 
partment of  Commerce  and  the  same  is  true  of  the  Indus- 
trial Cooperation  Service. 

In  brief,  therefore,  the  Department  is  prepared,  if 
it  shall  receive  the  support  of  Congress,  to  sustain  our 
commerce  and  industry  both  in  the  domestic  and  the 
foreign  field,  providing  both  a  scientific  and  a  commercial 
service  at  home  cooperating  with  the  great  commercial 
service  abroad.  It  is,  we  venture  to  think,  a  unique 
governmental  organization,  better  equipped  with  men 
and  apparatus  than  anything  of  its  kind  in  the  world. 


Foreign  Trade  After  the  War         189 

III 

THE  IDEALS  OF  AMERICAN  BUSINESS 

BY  HARRY  A.  WHEELER 

President  Chamber  of  Commerce  of  the  United  States 

Reconstruction  is  difficult  to  define  and  even  more 
difficult  to  interpret  because  the  problems  are  world- 
wide. Literally  it  means  to  construct  again,  to  rebuild. 
We  used  the  word  freely  in  the  period  after  the  Civil 
War  to  indicate  "the  process  by  which  the  seceded 
States  were  restored  to  their  rights  and  privileges  of  the 
Union."  In  many  of  the  belligerent  countries  the  word 
may  be  very  correctly  applied,  involving  as  it  does  the 
physical  reconstruction  of  a  devastated  area  over  which 
the  ravages  of  war  have  swept,  and  in  other  countries 
the  setting  up  of  new  governments  to  replace  those 
overthrown ;  but  in  our  country  neither  of  these  condi- 
tions confronts  us,  and  as  applied  to  our  home  concerns, 
our  problems  are  those  of  readjustment,  and  our  use 
of  the  term  reconstruction  in  connection  with  the  period 
upon  which  we  are  entering  is  justified  only  where  we 
apply  it  to  the  international  relationships  in  which  we 
are  participants,  or  in  order  that  a  common  term  may 
indicate  the  character  of  the  period  through  which  the 
world  is  passing. 

TWO   PHASES   OF   READJUSTMENT 

I  wish,  therefore,  to  present  for  consideration  two 
distinct  phases  of  reconstruction  or  readjustment,  one 
dealing  with  our  international  relationships,  and  the 
other  bearing  upon  our  internal  affairs,  for  an  endeavor 


190  Reconstructing  America 

to  adjust  the  latter  without  taking  into  account  the 
former  would  be  to  invite  certain  failure. 

The  footing  or  foundation  stone  of  political  and 
economic  reconstruction  will  be  laid  in  the  peace  treaty. 

Men  of  business  may  not  be  regarded  competent 
advisers  in  matters  of  diplomacy  and  statecraft  as 
affecting  political  reconstruction,  but  as  a  corollary  to 
this  assumption,  the  diplomat  or  statesman  may  not  be 
regarded  as  a  wholly  competent  adviser  in  matters  of 
economic  reconstruction. 

That  these  two  phases  of  the  problem  will  share 
equally  in  the  peace  negotiations,  no  one  may  doubt. 

Bad  diplomacy  has  been  responsible  for  much  of  the 
world's  ills.  Commercial  relationships  have  been  sorely 
strained  because  they  were  intermingled  with  political 
intrigue,  but  now,  on  the  one  hand  old  barriers  have 
been  broken  down  by  the  alliances  and  associations  of 
war,  while  on  the  other,  new  barriers  have  been  raised 
by  enmities  resulting  from  conflict  between  nations 
formerly  on  a  friendly  footing.  These  new  alignments 
merit  a  new  brand  of  diplomacy,  and  diplomacy  may 
well  take  a  lesson  out  of  the  book  of  Commerce  and  by 
applying  Modern  Commercial  Ethics  to  diplomatic 
relations  learn  how  much  easier  it  is  to  deal  simply  and 
directly  than  by  the  devious  parts  and  labyrinths  of 

evasion  and  deceit. 
•  > 

COMMERCE   IN   THE   COUNCILS   OF  PEACE 

We  may  assume  that  commerce  will  play  an  important 
role  in  all  of  the  world  readjustments,  and  it  becomes 
imperative  that  in  the  peace  terms  which  presently 
will  come  under  discussion,  certain  fundamental  consider- 


Foreign  Trade  After  the  War         191 

ations  affecting  commerce  shall  not  be  overlooked. 
Furthermore,  in  the  counsels  which  shall  determine 
the  international  political  and  economic  relations  of 
the  future,  American  business,  in  common  with  like 
interests  of  other  nations,  should  be  consulted  in  fram- 
ing the  peace  conditions. 

International  harmony  cannot  long  endure  secret 
diplomacy,  and  side  agreements  exist  between  certain 
units  in  the  family  of  nations.  Combinations  between 
nations  made  for  the  purpose  of  undermining  or  destroy- 
ing the  influence  or  standing  of  other  nations  are  as 
reprehensible  as  combinations  in  trade  for  the  same 
purpose. 

AN  INTERNATIONAL  PLAN  FOR  RATIONING  RAW  MATERIALS 

Failure  to  deal  generously  in  the  distribution  of  raw 
materials  will  seriously  impede  the  industrial  restoration 
of  nations  not  fortunate  enough  to  possess  basic  materials 
of  their  own  in  surplus  for  trading  purposes. 

Should  not  the  United  States  lead  in  proposing  an 
international  plan  for  rationing  basic  materials  and 
stabilizing  their  cost,  so  that  the  temptation  to  selfishly 
profit  by  the  original  ownership  and  control  shall  be 
replaced  during  the  period  of  reconstruction  by  a  broad 
recognition  of  the  needs  of  all  nations  to  reestablish 
their  productive  power  under  as  little  restraint  and  as 
rapidly  as  the  circumstances  may  permit? 

Such  a  plan  of  rationing  is  not  a  function  of  the  gov- 
ernment exclusive  of  the  aid  and  counsel  of  those  expert 
in  handling  these  commodities.  Making  the  plan  and 
carrying  it  into  effect  should  be  left  to  those  who  know 
the  processes  of  production  and  distribution,  with  only 


192  Reconstructing  America 

such  government  participation  as  may  give  official 
sanction  to  the  plan  and  provide  the  regulation  that 
will  assure  fair  dealing  and  reasonable  prices. 

A  LIVE   AND  LET  LIVE   POLICY   FOR  THE   WORLD 

The  principle  of  economic  boycott,  often  advanced 
as  a  punishment  to  those  nations  guilty  of  disturbing 
the  world's  peace,  is  neither  politically  nor  economically 
sound,  nor  is  the  principle  of  "favored  nation"  in 
commercial  treaties.  These  would  tend  only  to  drive 
the  nations  farther  apart  and  increase  the  unrest  in 
the  industrial  world. 

May  not  the  United  States  lead  here,  also,  in  a  decla- 
ration of  principles  providing  for  such  adjustments  as 
will  ultimately  assure  a  live  and  let  live  policy  for  the 
whole  world  ? 

The  fourth  and  last  of  the  international  problems  of 
reconstruction  is  the  use  of  the  remaining  ocean  tonnage 
and  of  the  new  fleets  as  they  leave  their  ways  in  the 
common  service  of  all  nations. 

Belligerents  and  neutrals  alike  have  been  sufferers 
from  the  practical  operations  of  the  German  submarines. 
Loss  of  shipping  has,  more  than  any  other  single  factor, 
overthrown  the  normal  operations  of  commerce  and 
trade,  destroyed  production,  and  brought  great  numbers 
of  the  world's  population  near  to  starvation. 

Reconstruction  cannot  proceed  under  principles  of 
just  consideration  for  the  needs  of  all  nations  except 
as  those  countries  having  ships  available  shall  so  far 
pool  their  tonnage  as  to  make  it  of  universal  service. 
Happily  the  United  States,  with  its  ocean  fleet  increasing 
daily,  is  in  a  fair  way  to  set  an  example  in  this  as  in 


Foreign  Trade  After  the  War        193 

other  matters  involving  international  problems  of 
reconstruction,  and  American  business  may  well  con- 
sider a  memorial  to  our  own  government  and  through 
it  to  the  Peace  Conference,  for  the  adoption  of  such  plans 
during  the  period  of  reconstruction  as  will  assure  a 
joint  control  and  distribution  of  overseas  shipping 
to  provide  all  nations  with  their  immediate  needs  of 
food  and  with  raw  materials,  and  transport  for  their 
products. 

We  have  been  said  to  be  a  people  of  ideals.  Well, 
I  hope  we  are.  We  are  given  a  demonstration  of  the 
fact  every  day  that  the  most  cold-blooded  and  self- 
centered  man  of  business,  when  he  is  confronted  with 
a  high  ideal,  is  amazing  in  the  rapidity  with  which  he 
rises  to  the  ideal  and  the  rapidity  with  which  the  selfish- 
ness drops  away  from  him ;  it  is  discarded  almost  like 
a  cloak  that  is  thrown  aside.  For,  after  all,  underlying 
everything  in  American  nature,  we  have  the  idealisms 
that  have  been  planted  here  in  our  nation  and  have 
been  planted  in  our  lives  in  all  the  years  of  our  history, 
and  they  are  as  inseparable  from  us  as  parts  of  our  own 
being. 

My  belief  is  that  American  business  in  the  Peace 
Conference,  in  the  negotiations  with  the  factors  in 
Europe  with  which  we  must  come  in  contact  in  arrang- 
ing a  world-wide  reconstruction  program  and  in  the 
consideration  of  our  own  commercial  and  industrial 
interests  at  home,  will  rise  clearly  above  the  sordid 
and  the  selfish  and  the  material  things  and  will  strive 
to  lead  the  way  in  the  conference  of  nations  on  recon- 
struction to  that  high  plane  where  every  man  and  every 
nation  will  have  a  chance  to  rebuild  his  life  and  his 


194  Reconstructing:  America 

existence  under  conditions  that  will  be  as  nearly  as 
possible  those  ideal  conditions  under  which  we  have 
been  born  and  in  which  we  have  been  privileged  to  live. 

IV 

AMERICAN  ATTITUDE  ON  TREATY  READJUSTMENTS 

BY  FRED   BROWN  WHITNEY 

Chairman,  American  Manufacturers  Export  Association's  Committee  on  Com- 
mercial Treaties  and  Trade  Agreements 

The  American  attitude  on  treaty  readjustments, 
possibly,  can  be  surmised,  by  foreigners,  who  grasp 
the  American  way  of  looking  at  the  history  of  Europe 
under  autocratic  kings ;  and  the  facts  that  the  United 
States  can  meet  with  clean  hands  and  a  clear  conscience 
any  nation  that  thinks  it  wants  to  abrogate,  amend, 
renew,  or  negotiate  new  treaties  of  all  characters,  as 
incidents  of  the  war,  peace,  and  reconstruction ;  and 
that  the  United  States  will  come  out  of  the  war  just 
as  it  went  in,  for  one  principal  purpose ;  namely,  to 
protect,  perpetuate,  and  make  progress  for,  the  demo- 
cratic principles  upon  which  the  Republic  is  founded 
and  rests  secure. 

Materials,  money,  and  men,  it  has  lost,  not  gained. 
No  such  gains  were  expected,  wanted,  or  needed.  Just 
as  the  United  States  sympathized  with  the  nations  that 
are  fighting  against  the  "rule  and  ruin  autocracy"  in 
Germany,  the  United  States  sympathizes  with  these 
nations  in  their  loss  of  materials,  money,  and  men, 
and  fully  appreciates  their  needs  of  materials  and 
money  to  reconstruct  their  damaged  facilities,  in  order 
that  those  who  have  survived  may  pursue  happiness 


Foreign  Trade  After  the  War         195 

and  have  an  honorable  livelihood.  The  United  States 
naturally  wants  in  Europe  strong  nations  with  govern- 
ments absolutely  controlled  by  the  citizens  thereof, 
so  that  they  can  defend  the  faith  of  those  who  believe 
in  democratic  rule  rather  than  autocratic. 

Many  of  the  people  of  our  Republic  firmly  believe 
that  the  doctrine  of  the  divine  rights  of  kings  is  fast 
sinking  into  oblivion  and  that  soon  the  greater  part  of 
Europe  will  have  governments  controlled  unconditionally 
by  the  people,  and  peace  everlasting,  because  it  is  not 
likely  that  countries  which  are  run  by  the  citizens  thereof 
will  war  with  each  other  over  the  private  squabbles  of 
the  citizens  thereof,  or  what  a  private  citizen  of  one 
may  do  to  the  head  officials  of  another. 

Such  are  the  methods  of  a  republic  and  autocracies ; 
it  has  been  ever  so  in  Europe  because  history  reveals 
that: 

(a)  The  war  of  William  the  Conqueror  against  France 
was  precipitated  by  the  King  of  France  who  made  per- 
sonal reference  to  the  obesity  of  the  exceedingly  sensi- 
tive William,  who  was  so  stung  to  the  quick  that  he 
swore  his  favorite  oath, 

"By  the  splendor  of  God,  I  will  light  one  hundred 
thousand  candles  when  I  go  to  my  churching 
mass," 

and  proceeded  to  personally  lead  his  army  against 
France. 

He  died  shortly  after  from  a  wound  inflicted  by  the 
pommel  of  his  saddle. 

(b)  The  Hundred  Years'  War  resulted  largely  from 
the  kings  of  England  and  France  taking  up  the  petty 
quarrels  of  their  rival  fishermen. 


196  Reconstructing  America 

(c)  The  Thirty  Years'  War  was  caused  by  the  attempt 
of  the  King  of  Bohemia  to  avenge  the  pitching  from  a 
window  into  a  moat,  of  two  of  his  favorites  who  had 
engaged  in  a  religious  squabble,  which  by  the  King's 
actions,  was  turned  into  a  public  war  that  was  one  of 
the  bloodiest  in  history. 

(d)  The  length  of  the  Seven  Years'  War  resulted 
largely   because   Mme.    de   Pompadour,    a   favorite   of 
Louis  XV  of    France,   hated   Frederick    the   Great   of 
Prussia,  who  resented  this  favorite's  flattering  messages, 
and   thereby  caused  her  animosity  which   led  her   to 
influence  Louis  XV  to  join  Austria  against  Prussia. 

(e)  The  Franco-Prussian  War  of  1870  was  precipitated 
by  a  trivial  action  of  King  William  of  Prussia,  who  met 
the  French  Ambassador  on  the  promenade  of  a  watering 
place.     The  Ambassador  brought  up  a  dead  diplomatic 
subject,  the  King  referred  the  Ambassador  to  his  Chan- 
cellor,  turned  on  his  heel  and  walked  away  without 
attaching  then  much  importance  to  the  incident ;   how- 
ever, the  version  was  given  out  to  the  effect  that  the 
King  had  insulted  the  Ambassador  of  France.     France 
was  aflame  and  cried,  "On  to  Berlin."     Napoleon  III 
declared  war  and  the  Germans  came  on  to  Paris. 

(/)  The  Russian-Japanese  War  was  influenced  some- 
what by  the  general  attitude  of  Nicholas  toward  every- 
thing Japanese.  When  Nicholas  was  Czarowitz  he 
visited  Japan  where,  in  a  sacred  temple,  a  religious  fanatic 
assailed  him  with  a  club  and  dagger.  Prince  George 
of  Greece  knocked  the  fanatic  down  and  saved  the  future 
Czar  of  all  the  Russias,  who,  when  he  ascended  the 
throne,  joined  with  France  and  Germany  to  deprive 
Japan  of  the  fruits  of  victory  over  China,  and  later 


Foreign  Trade  After  the  War         197 

listened  to  those  counselors  who  argued  in  behalf  of  a 
war  between  Russia  and  Japan. 

The  American  attitude,  expressed  in  the  resolutions 
of  the  Chamber  of  Commerce  of  the  United  States, 
in  reference  to  a  popular  form  of  government  for 
Germany,  must  be  considered  by  anybody  who  seeks 
to  alter  the  commercial  relations  of  the  United  States 
with  any  country  which  is  dominated  by  an  auto- 
cratic king. 

It  is  essential  that  treaty  makers  grasp  why  the  free 
people  of  America  prefer  the  will  of  a  free  government 
to  the  whim  of  any  autocratic  king  and  understand  the 
predisposition  of  a  democracy  in  making  treaties  with 
governments  of,  by,  and  for  the  people. 

Specifically  what  the  United  States  will  do  re  Treaties 
incident  to  war,  peace,  reconstruction,  and  thereafter, 
is  a  subject  of  the  future ;  however,  a  study  of  facts, 
figures,  and  opinions  may  naturally  lead  one  to  believe 
that  the  substantial  indications  are  to  the  general 
effect  that  the  United  States  : 

(a)  Will  come  out  of  the  war  one  of  the  richest  and 
most  powerful  nations  in  history. 

(&)  Has  no  desire  or  design  to  use  that  power  or 
wealth  for  any  purposes  other  than  beneficial  to  the 
general  welfare  of  mankind. 

(c)  Will  gain  solely  what   it   entered   the  war  for : 
the  protection,  perpetuation,  and  progress  of  the  demo- 
cratic principles  upon  which  the  Republic  is  founded. 

(d)  Will    not    discriminate    economically    or    other- 
wise between  nations  that  respect  and  observe  the  prin- 
ciples, that  the  humblest   citizens   thereof  possess  the 
inalienable  rights  of  life,  liberty,  and  the  pursuit  of  hap- 


198  Reconstructing  America 

piness  and  from  such  citizens  a  government  derives  its 
just  powers. 

(e)  Will  not  enter  into  any  treaty,  alliance,  or  con- 
federation to  give  preference  by  regulations  of  com- 
merce or  revenue  in  order  to  practice  discriminations, 
as  such,  between  nations. 

(/)  Will  not  propose  changes  in  commercial  rela- 
tions or  treaties  until  the  same  have  been  considered 
scientifically  by  experts  familiar  with  the  economic 
needs  of  the  country,  the  diplomatic  relations  between 
the  countries  involved,  and  the  character  of  legislation 
needed  to  meet  the  terms  proposed. 

(g)  Will,  in  making  any  commercial  readjustments, 
seek  to  secure  concessions  especially  adapted  to  the 
United  States  products  rather  than  to  depend  upon  con- 
cessions embodied  in  treaties  with  other  countries  which 
may  change  their  treaty  relations  without  regard  to,  or 
for,  the  economic  needs  of  the  United  States,  and  to 
accomplish  the  foregoing,  will  want  distinctive  sched- 
ules and  highly  specialized  classifications  in  order  to 
prevent  any  discriminations  against  typical  American 
specialties  and  to  eliminate  the  innumerable  assimila- 
tions to  other  articles  in  which  the  United  States  has 
little,  if  any,  interest  in  common. 

(K)  Will  not  favor  the  continuation  after  the  war  of 
any  war  restrictions  on  exports  and  imports ;  except, 
possibly,  for  a  short  time,  in  case  such  restrictions  are 
imperative  to  adjust  abnormal  exchange  situations, 
transport  troops  home,  and  to  equitably  ration  essential 
materials  in  the  event  the  supply  thereof  cannot  keep 
up  with  the  demand  therefor. 

(i]     Will  liberally  and  adequately  cooperate  with  the 


Foreign  Trade  After  the  War         199 

nations  seeking  to  reconstruct  their  war-damaged  in- 
dustries for  the  purpose  of  giving  remunerative  employ- 
ment to  the  artisans  thereof. 

(;')  Will  not  lend  itself  to  measures  designed  to  en- 
able foreign  employers  to  pile  up  unreasonable  profits 
from  industry  or  commerce. 

(k)  Will  so  use  its  resources  as  to  try  to  preserve 
the  standard  of  living  of  the  American  workmen. 

(/)  Will  not  become  a  party  to  any  treaty  or  trade 
arrangement  incompatible  with  the  foregoing  principles 
or  with  the  political,  economic,  and  other  principles  an- 
nounced as  essentials  of  peace  by  the  President  of  the 
United  States  of  America. 


V 

NEW  PAN-AMERICA  GROWS  FROM  WAR 

BY  HON.  JOHN   BARRETT 

Director-General  Pan-American  Union 

The  world  war  has  done  more,  strange  though  it 
may  seem,  to  promote  real  solidarity  among  the  American 
republics  than  any  other  influence  since  the  declaration 
of  the  Monroe  Doctrine  in  1823.  Pan-America  and 
Pan-Americanism  have  had  an  impressive  meaning  for 
a  hundred  years,  but  nothing  like  the  significance  which 
they  will  have  in  the  future.  There  is  looming  up 
before  the  world  a  power  of  united  action  in  the  cooper- 
ation of  all  America  that  demands  world  attention.  .  .  . 

Until  this  world  struggle  came  on  there  had  been  no 
great  event  or  combination  of  events  in  history,  since 
the  common  efforts  of  a  century  ago  of  the  American 


200  Reconstructing  America 

republics  to  secure  independence,  which  made  a  vital 
test  of  their  unity  of  interest  and  action.  It  required 
a  situation  like  a  death  struggle  between  democracy 
and  autocracy  to  prove  whether  the  Pan-American 
castle  was  built  of  paper  or  concrete. 

Just  before  the  United  States  entered  the  war  predic- 
tions were  freely  made  by  the  enemies  of  the  United 
States  and  the  Allies  that,  if  the  United  States  par- 
ticipated in  the  conflict,  she  would  find  that  Pan-Ameri- 
canism was  a  mere  term  and  not  a  reality,  and  that  her 
sister  republics  of  Central  and  South  America  would 
desert  her  in  the  crisis.  .  .  .  The  Director-General 
of  the  Pan-American  Union,  who  for  sixteen  years  has 
labored  in  behalf  of  the  cause  of  practical  Pan-Ameri- 
canism, never  losing  belief  in  its  strength  of  principle, 
was  assailed  as  the  apostle  of  a  false  creed ! 

WHERE   REPUBLICANS   STOOD 

What  were  the  actual  facts  when  the  armistice  was 
declared?  Of  the  twenty  American  republics  reaching 
from  Cuba  and  Mexico  on  the  north  to  Argentina  and 
Chile  on  the  south,  thirteen  had  actually  broken  rela- 
tions with  the  common  enemy  of  the  United  States 
and  the  Allies;  eight  of  these  had  gone  further  and 
declared  war ;  seven  only  remained  technically  neutral, 
but  nearly  all  of  these  were  benevolently  neutral  and 
were  characterized  by  a  press  and  public  sentiment 
that  were  almost  unanimously  pro-United  States  and 
pro-Ally.  In  every  capital  of  Latin-America,  whether 
that  of  a  country  engaged  in  the  conflict  or  neutral, 
there  were  repeated  pro-United  States  and  pro-Ally 
demonstrations  and  enthusiastic  acts  of  sympathy. 


Foreign  Trade  After  the  War         201 

In  no  capital  were  there  spontaneous  pro-German 
demonstrations.  Of  the  ninety  millions  of  peoples 
living  in  Latin-America  it  can  be  safely  said  that  seventy- 
five  millions  were  sympathetic  with  the  United  States 
and  the  Allies  in  their  fight  for  the  victory  of  democratic 
principles.  There  is  no  question,  moreover,  that  if  the 
war  had  gone  on  another  six  months,  practically  all  of 
the  Latin-American  governments  would  have  broken 
relations  with  the  enemy  of  the  United  States  or  de- 
clared war  upon  it. 

It  will  be  agreed  that  in  the  consideration  of  the 
question  of  a  new  Pan-America  and  a  new  Pan-Ameri- 
canism conclusions  can  be  drawn  from  the  attitude  of 
the  press,  the  speeches  of  representative  statesmen,  and 
the  writings  of  influential  authors.  Never  before  has 
there  been  such  a  warming  toward  the  United  States 
in  the  views  expressed  this  way  as  has  characterized 
the  last  year  and  a  half.  The  unselfish,  high-principled 
attitude  of  the  United  States  in  this  war,  the  interpre- 
tation of  what  the  United  States  was  fighting  for  by 
President  Wilson,  and  the  methods  and  achievements 
of  the  United  States  were  everywhere  applauded  through- 
out Central  and  South  America.  .  .  . 

On  the  material  side,  moreover,  as  a  result  of  the 
necessary  developments  of  the  war,  the  commercial, 
financial,  and  other  business  interests  of  Latin-America 
came  into  a  new  contact  with  those  of  the  United  States 
and  a  new  realization  of  the  interdependence  of  the 
American  republics.  The  importers  and  exporters 
of  Latin-America  discovered  possibilities  of  trade  with 
their  brethren  of  the  north  of  which  they  never  dreamed 
before ;  they  learned  for  the  first  time  that  there  could 


202  Reconstructing  America 

be  evolved  a  mighty  Pan-American  economic,  com- 
mercial, and  financial  relationship  which  would  make 
Pan-America  almost  independent  of  Europe. 

NEW  VIEW   OF   US 

Still  further,  on  the  intellectual  side,  the  war  gave  Latin- 
America  a  new  outlook  upon  the  United  States.  It 
caused  the  Latin-American  peoples  to  study  the  insti- 
tutions, the  educational,  the  social,  and  the  intellectual 
development  of  the  United  States  as  they  had  not  done 
before.  It  inspired  great  numbers  of  their  men  and 
women  to  come  to  the  United  States  for  the  purpose 
of  travel  and  study,  who  before  had  always  gone  to 
Europe ;  and  they  found  in  the  United  States  a  welcome 
and  an  appreciation  of  them  which  they  had  not  before 
thought  possible,  because  of  differences  in  language  and 
race.  So  pronounced  did  this  particular  development 
become  that  within  six  months  after  the  United  States 
entered  the  war  one  could  hear  in  all  the  hotels,  cafes, 
and  restaurants  of  New  York,  and  upon  the  streets 
and  in  the  theaters,  more  Spanish  spoken  than  any  other 
foreign  tongue,  not  excepting  even  French ! 

On  the  other  hand,  the  war  has  awakened  the  Ameri- 
can people  to  an  appreciation  of  the  peoples  and  coun- 
tries of  Latin-America  which  they  did  not  have  before. 
Although,  through  the  unremitting  labors  of  the  Pan- 
American  Union,  of  the  Departments  of  State  and 
Commerce  of  the  United  States,  of  the  United  States 
Ambassadors,  Ministers,  and  Consuls  in  Latin-America, 
and  of  the  Latin-American  Ambassadors,  Ministers, 
and  Consuls  in  the  United  States,  a  great  Pan-American 
movement  had  been  inaugurated  many  years  ago  and 


Foreign  Trade  After  the  War        203 

had  rapidly  progressed  during  the  passing  years,  it 
required  some  overwhelming  stroke  like  the  war  to 
arouse  widespread  interest  throughout  the  United  States 
in  Central  and  South  America.  The  dependence  of 
the  United  States  and  its  allies  upon  Latin-America 
for  all  kinds  of  raw  products  necessary  for  the  manu- 
facturing plants  of  the  United  States  and  for  the  con- 
duct of  the  war  caused  those  economic,  commercial, 
and  financial  interests  of  the  United  States  which  have 
not  before  realized  the  resources  of  Latin-America  to 
now  respect  them. 

The  splendid  response  of  the  Latin-American  Gov- 
ernments and  peoples  to  the  necessities  of  the  situation 
.  .  .  appealed  to  the  rank  and  file  of  the  American 
people  and  caused  them  to  say,  "Well  done,  our  sisters 
of  the  South ;  for  such  attitude  and  action  we  must 
know  you  better."  Every  time  a  Latin-American  Gov- 
ernment took  its  stand  alongside  the  United  States  and 
the  Allies  there  was  applause  from  New  York  to  Cali- 
fornia, followed  by  a  desire  to  learn  more  of  the  country 
and  people  taking  such  a  step.  An  interest,  before 
lacking,  was  taken  in  Latin-American  statesmen,  finan- 
ciers, merchants,  and  scholars  visiting  the  United  States. 
In  the  universities,  colleges,  and  public  schools  there 
grew  a  desire  to  know  more  of  the  history,  geography, 
resources,  and  languages  of  these  Southern  lands. 

CLEARING   HOUSE    OF   OPINIONS 

These  conclusions  are  based  upon  the  actual  knowl- 
edge of  the  Pan-American  Union  which,  as  the  inter- 
national organization  of  all  the  American  republics, 
devoted  to  the  development  of  commerce,  friendship,, 


204  Reconstructing  America 

and  peace  among  them,  is  an  ideal  barometer  of  Pan- 
American  sentiment.  The  correspondence  that  pours 
into  its  office  from  all  over  the  Western  Hemisphere, 
the  newspapers  from  all  parts  of  the  United  States  and 
Latin-America  which  are  perused  by  careful  readers, 
the  numerous  callers  from  both  North  and  South 
America,  bear  out  these  statements  in  addition  to  the 
remarkable  record  already  given  of  the  attitude  of 
the  Latin-American  republics  in  the  war.  To-day  the 
mail  of  the  Pan-American  Union  is  flooded  with  inquiries 
of  every  kind  from  all  classes  of  men  and  women  in 
regard  to  the  Latin-American  republics  and  the  possi- 
bilities of  practical  Pan- Americanism,  which  means  in 
its  simplest  interpretation  "the  cooperation  of  all  the 
American  republics  for  their  common  good." 

In  the  ten  years  previous  to  the  outbreak  of  the 
world  war,  the  trade  of  the  United  States  with  Latin- 
America  grew  more  rapidly  than  that  of  any  other 
nation.  Contrary  to  the  general  impression,  the  com- 
merce of  the  United  States  with  Latin-America  in  the  last 
fiscal  year  before  the  outbreak  of  the  war,  1913-1914, 
was  larger  than  that  of  Germany.  .  .  . 

Again,  to  show  how  the  United  States  and  Latin- 
America  cooperated  to  take  care  of  the  unusual  com- 
mercial situation  resulting  from  the  war,  the  value 
of  exports  and  imports  exchanged  between  the  United 
States  and  Latin-America  grew,  during  the  four  years 
of  the  conflict,  nearly  one  billion  dollars,  or,  from  approxi- 
mately $750,000,000  to  $1,750,000,000. 

Although  this  increase  may  have  been  due  largely  to 
the  disappearance  of  the  Central  Powers  from  the 
field  and  the  forced  limitations  on  the  trade  of  Great 


Foreign  Trade  After  the  War         205 

Britain  and  France  and  the  neutral  countries,  and  also 
to  the  increased  cost  of  articles  and  the  lessened  value 
of  the  dollar,  still,  these  figures  are  most  suggestive 
of  the  interdependence  in  trade  and  finance  of  North 
and  South  America  —  an  interdependence  which  is 
going  to  grow  stronger  in  the  future  era  of  new  Pan- 
Americanism,  provided  the  financial,  commercial,  and 
governmental  interests  of  the  United  States  will  do 
their  part  in  meeting  the  problems  and  necessities  that 
are  before  them.  Let  the  business  interests  of  the 
United  States  get  away  from  the  "bogy"  that  those  of 
Germany  can  outdo  them  in  Latin-America,  and,  tak- 
ing advantage  of  what  they  have  done  in  the  war,  go 
ahead  now  with  the  intention  of  serving  Latin-America 
the  best  they  know  how,  with  fairness,  with  a  square 
deal  uppermost  in  their  minds,  and  with  the  intention 
of  developing  confidence  as  well  as  commerce. 

AGENCY   OF   FRIENDSHIP 

It  is  fitting  to  say  a  word  about  the  Pan-American 
Union  as  a  practical  and  powerful  agency  for  the  advance- 
ment of  commerce,  friendship,  and  peace  among  the 
American  republics.  Let  every  person  who  is  inter- 
ested in  practical  Pan-Americanism  realize  the  facilities 
of  this  office  in  Washington,  housed  in  a  building 
which,  one  of  the  greatest  living  French  architects  has 
said,  " combines  nobility  of  purpose,  beauty  of  archi- 
tecture, and  usefulness  of  purpose  more  than  any  other 
public  building  in  the  world."  Let  it  be  borne  in  mind 
that  in  that  building  is  a  vigorous,  going  concern ;  an 
international  bureau  of  information,  with  a  large  star! 
of  experts  in  commerce  and  other  international  rela- 


CHAPTER  X 

BRIDGING  THE  GULF  BETWEEN  CAPITAL  AND 
LABOR 


THE  FOUR  PARTNERS  IN  INDUSTRY 

BY  JOHN  D.  ROCKEFELLER,  JR. 

WE  stand  at  the  threshold  of  the  period  of  reconstruc- 
tion, and  as  we  turn  from  the  problems  of  war  to  the 
problems  of  peace  we  may  look  for  such  success  in 
solving  the  latter  as  has  been  attained  in  dealing  with 
the  former  only  as  we  are  animated  by  the  same  spirit 
of  cooperation  and  brotherhood.  The  hope  of  the 
future  lies  in  the  perpetuation  of  that  spirit  and  its 
application  to  the  grave  problems  which  confront  us 
nationally  as  well  as  internationally. 
I  Among  these  problems  none  is  more  important  or 
more  pressing,  from  the  fact  that  it  touches  almost  every 
department  of  life,  than  that  of  industry. 

What  is  the  purpose  of  industry?  Shall  we  cling 
to  the  old  conception  of  industry  as  primarily  an  insti- 
tution of  private  interest,  whereby  certain  favored  indi- 
viduals are  enabled  to  accumulate  wealth,  irrespective 
of  the  well-being,  health,  and  happiness  of  those  engaged 
in  its  production  ?  Or  shall  we  adopt  the  modern  view- 
point, which  regards  industry  as  in  the  nature  of  social 
service,  as  well  as  a  revenue-producing  process  for 
capital  and  labor? 

308 


(.Opyright  liy   I  nderwood   &   Underwood,    N.   Y. 

JOHN    I).   ROC'KKFKI.I.KK,  JR. 


Capital  and  Labor  209 

Is  it  not  true  that  any  industry,  to  be  successful,  must 
insure  to  labor  adequately  remunerative  employment 
under  proper  working  conditions ;  must  render  useful 
service  to  the  community  and  earn  a  fair  return  on  the 
money  invested;  and  also  that  a  prime  consideration 
in  the  carrying  on  of  industry  should  be  the  well-being 
of  the  men  and  women  engaged  in  it  ? 

The  soundest  industrial  policy  is  that  which  has  con- 
stantly in  mind  the  welfare  of  the  employees  as  well  as 
the  making  of  profits,  and  which,  when  necessity  arises, 
subordinates  profits  to  welfare. 

It  must  be  borne  in  mind,  however,  that  industry 
cannot  be  successful  unless  not  only  the  community 
and  the  worker  are  adequately  served,  but  those  whose 
money  is  invested  reap  a  just  return. 

PARTNERSHIP    DEFINED 

Who  are  the  parties  to  industry?  They  are  four  in 
number  —  Capital,  Management,  Labor,  and  the  Com- 
munity. Capital  is  represented  by  the  stockholders 
and  is  usually  regarded  as  embracing  Management. 
Management  is,  however,  an  entirely  separate  and  dis^ 
tinct  party  to  industry ;  it  consists  of  the  executive 
officers,  who  are  the  administrators  of  the  industry, 
and  who  bring  to  it  technical  skill  and  managerial 
experience.  Labor  is  represented  by  the  employees, 
but  its  contribution,  unlike  that  of  capital,  is  not  detach- 
able from  the  one  who  makes  it,  for  it  is  his  physical 
effort,  his  strength,  his  life.  Here  the  list  usually  ends, 
for  the  fourth  party,  namely,  the  community,  whose 
interest  is  vital  and  in  the  last  analysis  controlling,  is 
too  often  ignored. 


210  Reconstructing  America 

The  community's  right  to  representation  in  the  con- 
trol of  industry  and  in  the  shaping  of  industrial  policies 
is  similar  to  that  of  labor.  But  for  the  community's 
contribution,  in  the  maintenance  of  law  and  order,  of 
agencies  of  transportation  and  communication,  of 
systems  of  money  and  credit  and  of  other  services,  all 
involving  continuous  outlays,  the  operation  of  capital, 
management,  and  labor  would  be  enormously  hampered, 
if  not  rendered  well-nigh  impossible. 

Furthermore,  the  community  is  the  consumer  of  the 
product  of  industry,  and  the  money  which  it  pays  for 
the  product  provides  the  wages,  salaries,  and  profits 
that  are  distributed  among  the  other  parties. 

What  are  the  relations  between  these  four  parties 
in  industry?  It  is  frequently  maintained  that  they 
are  hostile.  I  am  convinced  that  the  opposite  is  the 
case,  that  they  are  not  those  of  enemies,  but  of  partners, 
and  that  the  four  parties  have  a  common  interest. 
Furthermore,  success  cannot  be  brought  about  by  any 
one  of  the  parties  assuming  a  position  of  dominance 
and  arbitrary  control,  but  is  dependent  rather  upon 
the  cooperation  of  all  four.  Partnership,  not  enmity, 
is  the  watchword.  While  the  relationship  thus  described 
is  undoubtedly  the  ideal  one,  we  may  well  ask  to  what 
extent  is  this  ideal  realized  in  the  average  industry. 
Regretfully  we  must  answer,  not  often. 

THE    WIDENING   GULF 

A  gulf  has  grown  up  between  capital  and  labor,  which 
is  ever  widening.  These  two  forces  have  come  to  work 
against  each  other,  each  alone  seeking  to  promote  its 
own  selfish  ends.  Thus  have  come  about  the  various 


Capital  and  Labor  211 

incidents  of  industrial  warfare  so  regrettably  common. 

Industry  has  become  highly  specialized.  The  work- 
man of  to-day  devotes  his  energies  as  a  rule  to  the  count- 
less repetition  of  a  single  act  or  process,  which  is  only 
one  of  perhaps  a  hundred  operations  necessary  to  trans- 
form the  raw  material  into  the  finished  product.  Very 
naturally  the  worker  loses  sight  of  the  significance  of 
the  part  which  he  plays  in  industry  and  feels  himself 
but  one  of  many  cogs  in  a  wheel. 

All  the  more  is  it  necessary  that  he  should  have  con- 
tact with  those  who  are  likewise  related  to  the  industry, 
so  that  he  may  still  realize  that  he  is  a  part  and  a  neces- 
sary, though  inconspicuous,  part  of  a  great  enterprise. 

Thus  only  can  common  purpose  be  kept  alive,  indi- 
vidual interests  safeguarded. 

The  question  which  confronts  the  student  of  indus- 
trial problems  is  how  to  reestablish  personal  relation 
and  cooperation  in  spite  of  the  changed  conditions. 
The  answer  is  absolutely  clear  and  unmistakable : 
Through  adequate  representation  of  the  four  parties 
thereto  in  the  councils  of  industry. 

As  regards  the  organization  of  labor,  it  is  just  as  proper 
and  advantageous  for  labor  to  associate  itself  into 
organized  groups  for  the  advancement  of  its  legitimate 
interests  as  for  capital  to  combine  for  the  same  objects. 
Such  associations  of  labor  manifest  themselves  in  col- 
lective bargaining,  in  an  effort  to  secure  better  working 
and  living  conditions,  in  providing  machinery  whereby 
grievances  may  easily  and  without  prejudice  to  the 
individual  be  taken  up  with  the  management.  Some- 
times they  provide  benefit  features,  or  seek  to  increase 
wages,  but  whatever  their  specific  purpose,  so  long 


Reconstructing  America 


as  it  is  to  promote  the  well-being  of  the  employees,  hav- 
ing always  due  regard  for  the  just  interest  of  the  employer 
and  the  public,  leaving  every  worker  free  to  associate 
himself  with  such  groups  or  to  work  independently  as 
he  may  choose,  they  are  to  be  encouraged. 

ORGANIZATION   AND   ITS   EFFECTS 

But  organization  has  its  danger.  Organized  capital 
sometimes  conducts  itself  contrary  to  law  and  in  disre- 
gard of  the  interests  both  of  labor  and  the  public.  Such 
organizations  cannot  be  too  strongly  condemned  or  too 
vigorously  dealt  with.  Although  they  are  the  excep- 
tion, such  publicity  is  generally  given  to  their  unsocial 
acts  that  all  organizations  of  capital,  however  rightly 
managed  or  broadly  beneficent,  are  thereby  brought 
under  suspicion. 

Likewise  it  sometimes  happens  that  organizations  of 
labor  are  conducted  without  just  regard  for  the  rights 
of  the  employer  or  the  public.  Such  organizations 
bring  discredit  and  suspicion  upon  other  organizations 
which  are  legitimate  and  useful,  just  as  is  the  case  with 
improper  organizations  of  capital,  and  they  should 
be  similarly  dealt  with. 

We  should  not,  however,  allow  the  occasional  failure 
in  the  working  of  the  principle  of  the  organization  of 
labor  to  prejudice  us  against  the  principle  itself,  for  the 
principle  is  fundamentally  sound.  Since  the  United 
States  went  into  the  war  the  representation  of  both 
labor  and  capital  in  common  councils  has  been  brought 
about  through  the  War  Labor  Board,  composed  equally 
of  men  from  the  ranks  of  labor  and  the  ranks  of  capital. 

Whenever  questions  of  dispute  have  arisen  in  various 


Capital  and  Labor  213 

industries,  the  War  Labor  Board  has  stepped  in  and 
made  its  findings  and  recommendations,  which  have 
been  adopted  by  both  labor  and  capital  in  practically 
every  instance.  In  this  way  more  continuous  operation 
has  been  made  possible  and  the  resort  to  the  strike 
and  lockout  has  been  less  frequent. 

ENGLAND'S  EFFORTS  TO  COORDINATE  CAPITAL  AND  LABOR 

In  England  there  were  made  during  1917  three  impor- 
tant government  investigations  and  reports  looking 
toward  a  more  complete  program  of  representation  and 
cooperation  on  the  part  of  labor  and  capital.  The  first 
is  commonly  known  as  the  Whitley  Report,  made  by  the 
Reconstruction  Committee,  now  the  Ministry  of  Recon- 
struction. To  a  single  outstanding  feature  this  plan 
owes  its  distinction.  It  applies  to  the  whole  of  industry 
the  principle  of  representative  government. 

In  brief,  its  recommendations  are  that  there  be 
formed  industrial  councils,  national,  district,  and  works, 
labor  and  capital  to  be  equally  represented  in  each, 
with  an  impartial  or  neutral  presiding  officer.  National 
councils  would  be  composed  of  the  national  trades 
unions  on  the  one  hand  and  national  employers'  asso- 
ciations on  the  other.  District  councils  would  include 
district  trades  unions  and  employers'  associations.  In 
the  works  councils  or  committees,  employers  and  em- 
ployees would  sit  together  and  would  be  in  close  cooper- 
ation with  district  and  national  councils.  The  function 
of  the  works  committees  is  to  establish  better  relations 
between  employers  and  employed  by  granting  to  the 
latter  a  greater  share  in  the  consideration  of  matters 
with  which  they  are  concerned. 


214  Reconstructing  America 

These  recommendations  are  of  additional  interest 
and  value  in  that  at  once  the  existing  forms  of  organiza- 
tion, both  of  labor  and  capital,  are  availed  of  and  made 
the  basis  for  the  new  cooperative  councils,  with  such 
additions  only  as  may  be  necessary.  The  Whitley 
plan  seeks  to  unite  the  organizations  of  labor  and  capital 
by  a  bond  of  common  interest  in  a  common  venture ; 
it  changes  at  a  single  stroke  the  attitude  of  these  power- 
ful aggregations  of  class  interest  from  one  of  militancy 
to  one  of  social  service ;  it  establishes  a  new  relation  in 
industry. 

Another  investigation  and  report  was  made  by  a  Com- 
mission on  Industrial  Unrest  appointed  by  the  Prime 
Minister,  which  made  these  interesting  recommenda- 
tions : 

1 .  That  the  principle  of  the  Whitley  report  as  regards 
industrial  councils  be  adopted. 

2.  That  each  trade  should  have  a  constitution. 

3.  That   labor   should    take   part   in    the   affairs   of 
industry  as  partners  rather  than  as  employees  in  the 
narrow  sense  of  the  term. 

4.  That  closer  contact  should  be  set  up  between  em- 
ployers and  employed. 

The  third  report,  prepared  by  the  Ministry  of  Labor, 
on  the  question  of  the  constitution  and  working  of  the 
works  committee  in  a  number  of  industries,  is  a  valuable 
treatise  on  the  objects,  functions  and  methods  of  pro- 
cedure which  have  been  tried  in  actual  practice. 

These  reports,  together  with  a  report  on  reconstruc- 
tion, made  by  a  sub-committee  of  the  British  Labor 
party,  outlining  its  reconstruction  program,  a  most 
comprehensive  and  thoughtful  document,  indicates 


Capital  and  Labor  215 

the  extent  and  variety  of  the  study  which  has  been 
given  to  the  great  problem  of  industrial  reconstruction 
in  England.  All  point  toward  the  need  of  more  ade- 
quate representation  of  labor  in  the  conduct  of  industry 
and  the  importance  of  closer  relations  between  labor 
and  capital. 

REPRESENTATION    PLANS    IN    BIG    AMERICAN    INDUSTRIES 

A  simpler  plan  than  those  to  which  reference  has  been 
made,  less  comprehensive  and  complete,  building  from 
the  bottom  up,  has  been  in  operation  for  varying  periods 
of  time  in  a  number  of  industries  in  this  country,  notably 
the  Standard  Oil  Company  of  New  Jersey,  the  Colorado 
Fuel  and  Iron  Company,  the  Consolidation  Coal  Com- 
pany, some  of  the  works  of  the  General  Electric  Com- 
pany, and  others,  and  is  worthy  of  serious  consideration 
in  this  connection. 

Beginning  with  the  election  of  representatives  in  a 
single  plant,  it  is  capable  of  indefinite  development  to 
meet  the  complex  needs  of  any  industry  and  a  wide 
extension  to  include  all  industries.  Equally  applicable 
in  industries  where  union  or  non-union  labor,  or  both, 
are  employed,  it  seeks  to  provide  full  and  fair  repre- 
sentation of  labor,  capital,  and  management,  taking 
cognizance  also  of  the  community,  to  which  representa- 
tion could  easily  be  accorded,  and  has  thus  far  developed 
a  spirit  of  cooperation  and  good  will  which  commends 
it  to  both  employer  and  employee.  The  outstanding 
features  of  the  plan  are  briefly : 

Representatives  chosen  by  the  employees  in  propor- 
tion to  their  number  from  their  fellow  workers  in  each 
plant  form  the  basis  of  the  plan.  Joint  committees, 


216  Reconstructing  America 

composed  of  an  equal  number  of  employees  or  their 
representatives  and  an  equal  number  of  officers  of  the 
company,  are  found  in  each  plant  or  district.  These 
committees  deal  with  questions  of  cooperation  and 
conciliation,  safety  and  accident,  sanitation,  health  and 
housing,  recreation,  and  education.  Joint  conferences 
of  representatives  and  officers  of  the  company  are 
held  in  the  various  districts  several  times  each  year, 
and  there  is  also  an  annual  joint  conference,  at  which 
reports  from  all  districts  are  considered. 

Another  important  feature  of  the  plan  is  an  officer 
known  as  the  President's  Industrial  Representative, 
whose  duty  is  to  visit  currently  all  the  plants  and  confer 
with  the  representatives,  as  well  as  to  be  available 
always  for  conference  at  the  request  of  the  representa- 
tives. Thus  the  employees,  through  their  representa- 
tives chosen  from  among  themselves,  are  in  constant 
touch  and  conference  with  the  owners  through  their 
representatives  and  the  officers  in  regard  to  matters  of 
common  interest. 

The  employees'  right  of  appeal  is  the  third  feature. 
Any  employee  with  a  grievance,  real  or  imaginary,  may 
go  with  it  at  once  to  his  representatives,  who  frequently 
find  there  is  no  real  ground  for  grievance  and  are  able 
to  so  convince  the  employee.  But  if  a  real  grievance 
exists  or  dissatisfaction  on  the  part  of  the  employee  con- 
tinues, the  matter  is  carried  to  the  local  boss,  foreman 
or  superintendent,  where,  in  the  majority  of  cases, 
questions  are  satisfactorily  settled. 

Further  appeal  is  open  to  the  aggrieved  employee  to 
the  higher  officers  and  to  the  president,  and  if  satis- 
faction is  not  had  there,  the  court  of  last  appeal  may 


Capital  and  Labor  217 

be  the  Industrial  Commission  of  the  State,  where  such 
a  commission  exists ;  the  State  Labor  Board,  or  a  com- 
mittee of  arbitration. 

RESULTS   OBTAINED  BY  THE   EMPLOYEES*   BILL  OF  RIGHTS 

A  further  feature  is  the  employees'  bill  of  rights.  This 
covers  such  matters  as  the  right  to  caution  and  suspen- 
sion before  discharge,  except  for  such  serious  offenses 
as  are  posted  at  the  works,  the  right  to  hold  meetings 
at  appropriate  places  outside  of  working  hours,  the 
right  without  discrimination  to  membership  or  non- 
membership  in  any  society,  fraternity,  or  union,  and 
the  right  of  appeal  to  which  reference  has  just  been 
made. 

Where  some  such  plan  as  this  has  been  in  operation 
for  a  considerable  time,  some  of  the  results  were : 

First  — •  Uninterrupted  operation  of  the  plants  and 
increased  output. 

Second  —  Improved  working  and  living  conditions. 

Third  — •  Frequent  and  close  contact  between  em- 
ployees and  officers. 

Fourth  —  The  elimination  of  grievances  as  disturbing 
factors. 

Fifth  —  Good  will  developed  to  a  high  degree. 

Sixth  —  The  creation  of  a  community  spirit. 

Based  as  it  is  upon  principles  of  justice  to  all  those 
interested  in  its  operation,  its  success  can  be  counted 
on  so  long  as  it  is  carried  out  in  a  spirit  of  sincerity  and 
fair  play.  Furthermore,  it  is  a  vital  factor  in  reestab- 
lishing personal  relations  between  the  parties  in  interest 
and  developing  a  genuine  spirit  of  brotherhood  among 
them. 


£18  Reconstructing  America 

Here,  then,  would  seem  to  be  a  method  of  providing 
representation  which  is  just,  which  is  effective,  which 
is  applicable  to  all  employees  whether  organized  or  unor- 
ganized, to  all  employers  whether  in  associations  or 
not,  which  does  not  compete  or  interfere  with  organi- 
zations or  associations  in  existence,  and  which,  while 
developed  in  a  single  industrial  plant  as  a  unit,  may  be 
expanded  to  include  all  plants  of  the  same  industry, 
as  well  as  all  industries. 

Just  what  part  labor  organizations  and  employers' 
associations  can  best  take  in  such  a  plan,  it  will  require 
time  to  disclose,  but  certain  it  is  that  some  method 
should  be  worked  out  which  will  profit  to  the  fullest 
extent  by  the  experience,  strength,  and  leadership  of 
these  groups. 

Where  such  a  system  of  representation  has  been  in 
operation  it  has  proved  an  effective  means  of  enlisting 
the  interest  of  all  parties  to  industry,  of  reproducing 
the  contacts  of  earlier  days  between  employer  and 
employee,  of  banishing  misunderstanding,  distrust,  and 
enmity,  and  securing  cooperation  and  the  spirit  of 
brotherhood.  While  doubtless  defects  will  appear  in 
this  plan  and  other  methods  more  successfully  accom- 
plishing the  same  end  may  be  devised,  at  least  it  has 
proved  and  is  proving  that  in  unity  there  is  strength, 
and  that  a  spirit  of  cooperation  and  brotherhood  in 
industry  is  not  only  idealistically  right  but  practically 
sound  and  workable. 

If  the  foregoing  points  which  I  have  endeavored 
to  make  are  sound,  might  not  the  four  parties  to 
industry  subscribe  to  an  industrial  creed  somewhat 
as  follows : 


Capital  and  Labor  £19 

SUGGESTED  INDUSTRIAL  CREED 

1.  I  believe  that  labor  and  capital  are  partners,  not 
enemies ;  that  their  interests  are  common  interests,  not 
opposed,  and  that  neither  can  attain  the  fullest  measure 
of  prosperity  at  the  expense  of  the  other,  but  only  in 
association  with  the  other. 

2.  I  believe  that  the  community  is  an  essential  party 
to  industry,  and  that   it  should  have  adequate  repre- 
sentation with  the  other  parties. 

3.  I  believe  that  the  purpose  of  industry  is  quite  as 
much   to   advance   social   well-being  as  material   well- 
being  and  that  in  the  pursuit  of  that  purpose  the  inter- 
ests of  the  community  should  be  carefully  considered, 
the  well-being  of  the  employees  as  respects  living  and 
working  conditions  should  be  fully  guarded,  manage- 
ment   should    be   adequately    recognized,    and    capital 
should  be  justly  compensated,  and  that  failure  in  any 
of  these  particulars  means  loss  to  all  four. 

4.  I  believe  that  every  man  is  entitled  to  an  oppor- 
tunity to  earn  a  living,   to  fair  wages,   to  reasonable 
hours   of  work   and  proper   working   conditions,    to   a 
decent  home,  to  the  opportunity  to  play,  to  learn,  to 
worship,  and  to  love,  as  well  as  to  toil,  and  that  the 
responsibility  rests  as  heavily  upon  industry  as  upon 
government  or  society,  to  see  that  these  conditions  and 
opportunities  prevail. 

5.  I  believe  that  efficiency  and  initiative,  wherever 
found,  should  be  encouraged  and  adequately  rewarded, 
and  that  indolence,  indifference,  and  restriction  of  pro- 
duction should  be  discountenanced. 

6.  I  believe  that  the  provision  of  adequate  means 


220  Reconstructing  America 

for  uncovering  grievances  and  promptly  adjusting  them 
is  of  fundamental  importance  to  the  successful  conduct 
of  industry. 

7.  I  believe  that  the  most  potent  measure  in  bring- 
ing about  industrial  harmony  and  prosperity  is  adequate 
representation  of  the  parties  in  interest;    that  existing 
forms   of   representation   should   be   carefully    studied 
and  availed  of  in  so  far  as  they  may  be  found  to  have 
merit  and  are  adaptable  to  the  peculiar  conditions  in 
the  various  industries. 

8.  I  believe  that  the  most  effective  structure  of  repre- 
sentation is  that  which  is  built  from  the  bottom  up,  which 
includes  all  employees,  and,  starting  with  the  election 
of  representatives  in  each  industrial  plant,  the  forma- 
tion of  joint  works  committees,  of  joint  district  councils 
and  annual  joint  conferences  of  all  the  parties  in  interest 
in  a  single  industrial  corporation,  can  be  extended  to 
include  all  plants  in  the  same  industry  throughout  a 
nation,  all  industries  in  a  community,  in  a  nation,  and  in 
the  various  nations. 

9.  I  believe  that  the  application  of  right  principles 
never   fails   to   effect  right   relations ;    that   the   letter 
killeth  and  the  spirit   maketh    alive;    that  forms    are 
wholly  secondary  while  attitude  and  spirit  are  all  impor- 
tant, and  that  only  as  the  parties  in  industry  are  animated 
by  the  spirit  of  fair  play,  justice  to  all,  and  brotherhood, 
will   any   plans   which   they   may   mutually   work   out 
succeed. 

10.  I   believe   that   that   man   renders   the  greatest 
social  service  who    so  cooperates    in  the    organization 
of  industry  as  to  afford  to  the  largest  number  of  men 
the  greatest  opportunity  for  self-development  and  the 


Capital  and  Labor  221 

enjoyment  by  every  man  of  those  benefits  which  his 
own  work  adds  to  the  wealth  of  civilization. 

Never  was  there  such  an  opportunity  as  exists  to-day 
for  the  industrial  leader  with  clear  vision  and  broad 
sympathy  permanently  to  bridge  the  chasm  that  is 
daily  gaping  wider  between  the  parties  in  interest,  and 
to  establish  a  solid  foundation  for  industrial  prosperity, 
social  improvement,  and  national  solidarity.  Upon 
the  heads  of  the  leaders  —  it  matters  not  to  which  of  the 
four  parties  they  belong  —  who  refuse  to  reorganize 
their  industrial  households  in  the  light  of  the  modern 
spirit,  will  rest  the  responsibility  for  such  radical  and 
drastic  measures  as  may  later  be  forced  upon  industry 
if  the  highest  interests  of  all  are  not  shortly  considered 
and  dealt  with  in  a  spirit  of  fairness.  Who,  I  say,  dares 
to  block  the  wheels  of  progress,  and  to  fail  to  recognize 
and  seize  the  present  opprotunity  of  helping  to  usher 
in  a  new  era  of  industrial  peace  and  prosperity  ? 


CHAPTER  XI 

CAPITAL  AND   LABOR  AFTER  THE  WAR 
I 

AFTER- WAR  LABOR  QUESTIONS  —  WAGES  AND  PRICES 

BY  ELBERT  H.   GARY 
Chairman  Board  of  Directors,  United  Stales  Steel  Corporation 

THE  most  colossal,  destructive,  and  costly  of  all  wars 
has  terminated.  Right  has  prevailed.  The  overthrow 
of  civilization  has  been  prevented.  The  principles  of 
liberty  and  freedom  and  equal  opportunity  have  been 
reestablished.  We  need  not  permit  to  go  unchallenged 
the  statements  made  and  widely  published  as  to  who 
won  the  war.  So  far  as  human  effort  is  concerned  vic- 
tory was  achieved  by  a  combination  of  circumstances. 

Necessarily  we  must  consider  of  paramount  impor- 
tance the  labor  question.  During  the  war  the  wage  rates 
have  been  increased  materially  and  frequently.  They 
now  are  much  higher  than  ever  before,  so  far  as  I  am 
informed.  It  is  claimed  in  some  respects  they  are  out 
of  proportion.  For  one,  I  believe  we  have  not  been  pay- 
ing more  than  was  proper  and  just.  The  necessary 
costs  of  living  have  been  growing  and,  unless  and  until 
they  are  reduced,  it  would  seem  that,  on  the  average, 
the  present  wages  are  reasonable. 

It  is  urged  that  on  the  basis  of  the  present  scale  of 

223 


Capital  and  Labor  After  the  War     223 

wages  the  employers  cannot  afford  to  make  reductions 
in  the  prices  of  their  commodities  and  many  insist  they 
are  entitled  to  higher  rates.  As  we,  in  this  country 
at  least,  are  operating  and  living  on  a  basis  of  general 
prices  that  are  abnormal,  we  might  consider  the  propriety 
of  making  reductions  at  the  same  time  in  every  direction, 
but  this  would  be  impracticable.  Therefore,  if  there 
are  to  be  reductions,  they  must  be  gradual  and  con- 
sidered in  individual  cases.  We  must  commence  at 
some  point  or  place. 

UNWISE   TO  REDUCE   WAGES 

Judging  from  the  past  all  of  us  believe  we  should 
not  commence  to  make  reductions  at  the  point  of  wage 
rates.  Sacrifices  must  previously  be  made  by  employ- 
ers. Our  employees  must  continue  to  be  treated  liberally 
with  respect  to  their  compensation  and  general  welfare. 
We  will  continue  to  show  to  them  that  it  is  our  intention 
to  consider  their  merits  and  to  treat  them  as  associates 
and  valuable  assistants  in  our  work.  We  should  give 
no  cause  for  reasonable  complaint  or  unfavorable 
criticism. 

If  the  workmen  generally  are  treated  fairly  and  liberally 
they  will  stand  and  contend  for  fair  treatment  of  the 
employer.  I  refer  now  to  the  wage-earners.  But  who 
are  workmen?  You  and  I,  as  well  as  the  man  who 
works  by  the  day.  Most  of  us,  if  not  every  one 
of  us,  started  on  the  farms  or  in  the  shops  or  mills, 
for  very  low  compensation,  and  we  are  proud  of 
it.  We  are  still  workmen,  with  long  hours  and 
arduous  tasks.  No  man  wishes  to  remain  at  the 
bottom  of  any  ladder.  .  .  . 


£24  Reconstructing  America 

GREAT  PROSPERITY  AHEAD 

There  should  be  no  danger  in  this  country  of  serious 
business  depression.  We  are  so  rich  and  prosperous 
and  our  resources  are  so  large  that  the  indulgence  of 
feelings  of  fear  or  doubt  as  to  our  financial,  commer- 
cial, or  industrial  safety  and  progress  would  be  wholly 
unjustified.  Our  prospects  are  bright,  our  opportunities 
for  success  are  greater  than  ever  before. 

The  next  five  years  in  this  country  will  be  the  most 
progressive,  prosperous,  and  successful  of  our  history ;  the 
results  will  astonish  even  the  most  optimistic  of  to-day. 
We  need  to  be  conservative,  thoughtful,  persistent,  fair- 
minded,  and  wise  up  to  the  limit  of  our  understanding. 
This  is  peculiarly  a  time  for  constructive  thought  and 
action ;  for  cool  heads,  for  courage,  for  the  exercise  of 
a  spirit  of  fairness ;  even  for  sacrifice  when  necessary. 

II 

LABOR  TO  RULE  THE  WORLD 

BY  CHARLES  M.   SCHWAB 

We  are  at  the  threshold  of  a  new  social  era.  This 
new  order  of  things  may  work  great  hardship  for  many 
of  us.  It  is  going  to  come  upon  us  sooner  than  we  ex- 
pect. It  is  social  renaissance  of  the  whole  world.  Some 
people  call  it  Socialism,  others  call  it  Bolshevism. 
It  means  but  one  thing,  and  that  is  that  the  man  who 
labors  with  his  hands,  who  does  not  possess  property, 
is  the  one  who  is  going  to  dominate  the  affairs  of  this 
world,  not  merely  Russia,  Germany,  and  the  United 
States,  but  the  whole  world. 


Copyright  l>y  Clinedinst  Stiulio,  Washington,   1  >.  C. 
CMARLKS   M.   SCHWAB 


Capital  and  Labor  After  the  War     225 

This  great  change  is  going  to  be  a  social  adjustment. 
I  repeat  that  it  will  be  a  great  hardship  to  those  who 
control  property,  but  perhaps  in  the  end  it  will  work 
estimably  to  the  good  of  us  all.  Therefore,  it  is  our 
duty  not  to  oppose,  but  to  instruct,  to  meet,  and  to 
mingle  with  the  view  of  others. 


AMERICA  WILL  LEAD   ALL 

The  translation  from  the  old  to  the  new  order  of 
things  will  be  so  gradual  that  we  will  hardly  realize 
that  it  has  occurred.  The  pendulum  will  swing  so  far 
that  you  and  I  may  find  it  hard  for  a  time,  but  there 
will  be  an  adjustment.  This  great  land  of  ours  will 
occupy  its  position  of  leadership  as  long  as  the  honesty 
and  virility  of  its  manhood  and  womanhood  shall 
continue. 

As  one  goes  on  in  life  accumulating  wealth,  the  less 
one  thinks  about  it.  The  other  day  I  went  to  a  bank 
and  asked  for  a  loan  of  $2,000,000.  The  President 
told  me  I  already  owed  the  bank  $2,000,000.  I  told 
him  I  had  forgotten  all  about  it.  However,  the 
aristocracy  of  the  future  is  not  going  to  be  the 
aristocracy  of  wealth ;  it  is  going  to  be  the  aristoc- 
racy of  men  who  have  done  something  for  their 
country  and  for  the  world  at  large.  Such  men  will 
be  true  aristocrats. 

When  that  time  comes,  wealth  will  not  be  the 
standard,  nor  will  lineage  of  birth,  but  the  standard 
will  be  the  man  of  honorable  and  straightforward 
demeanor. 


226  Reconstructing  America 

WORLD  TENDENCY  UPWARD 

Whatever  the  Creator  has  designed  will  come,  and 
it  will  be  good.  Changes  in  social  conditions  do  not 
come  by  men  alone,  but  because  God  decrees  them. 

In  viewing  the  situation,  I  have  never  for  one  moment 
felt  discouraged  or  blue.  I  am  just  as  optimistic  as 
I  have  ever  been  about  myself,  my  fellow-men,  and  this 
country.  The  tendency  of  the  world  has  always  been 
onward  and  upward.  The  future  of  this  country  will 
be  what  we  think  it  will  be.  These  changes  are  neces- 
sary, but  the  future  will  more  than  repay  us  for  the 
sacrifices  we  make,  not  only  in  material  things,  but  in 
spiritual  things,  for  it  is  the  spiritual  things  that  make 
life  worth  living. 

Ill 

LABOR'S  GOLDEN  AGE  HERE 

BY  HON.  JOSEPHUS  DANIELS 

Secretary  of  the  Navy 

The  full  consecration  of  men  of  toil  in  our  country 
has  been  demonstrated  in  their  doffing  overalls  and 
donning  the  military  uniforms,  in  their  increase  in 
production  in  field  and  factory  of  everything  needed 
for  the  maintenance  of  army,  navy,  and  civilian  popu- 
lation ;  in  their  robust  patriotism  applied  in  building 
ships  in  the  coldest  winter  ever  known  at  a  speed  with- 
out, parallel ;  in  the  rapid  production  of  munitions  and 
all  war  material,  and  in  their  eagerness  to  prosecute 
the  war  by  investing  their  earnings  in  Liberty  bonds, 
and  in  all  causes  that  contributed  to  war  needs.  But 


Capital  and  Labor  After  the  War      227 

we  owe  more  to  the  spirit  of  whole-hearted  devotion 
to  this  free  land  and  its  free  institutions  by  organized 
labor.  ...  It  is  well  known  that  of  all  men,  peace 
is  dearest  to  men  who  earn  their  bread  in  the  sweat 
of  their  face.  Before  liberty  was  imperiled  by  Prussian 
Junkerism  every  labor  organization  was  a  peace  society, 
but  every  one  was  a  peace  society  based  upon  the  para- 
dox of  Buck  Fanshaw  :  "We  will  have  peace  if  we  have 
to  fight  for  it."  And  they  are  fighting  now  to  end  war 
in  their  day  and  for  all  time. 

HOW   LABOR   HELPED   US   TO   FIGHT 

With  3,000,000  men  under  arms,  called  from  field 
and  factory,  the  farmers  of  America  in  1918  furnished 
878,000,000  bushels  of  wheat  as  against  an  average 
crop  of  600,000,000  bushels,  enough  to  feed  our  own 
population  and  export  278,000,000  bushels  to  feed  our 
allies.  The  increase  in  barley  and  rye  has  been  as 
large  in  proportion.  The  farmers  have  produced 
13,600,000  bales  of  cotton  as  against  11,300,000  bales 
last  year.  After  exporting  many  thousand  horses  and 
mules  to  the  war  zone,  the  number  at  home  has  increased 
454,000.  The  number  of  milch  cows  has  increased 
390,000,  other  cattle  2,000,000,  sheep  1,300,000,  and 
swine  4,000,000.  These  figures  illustrate  what  labor  has 
done  on  the  farm  with  hundreds  of  thousands  of  its 
most  vigorous  men  in  the  army  and  navy. 

What  labor  has  done  in  producing  munitions,  in 
shipbuilding,  and  other  industrial  lines  is  an  illuminating 
story  of  American  skill  and  untiring  industry,  com- 
manding the  admiration  of  all  peoples.  The  average 
production  of  steel  ingots  and  castings,  which  represents 


228  Reconstructing  America 

the  total  steel  production  from  1907  to  1916  inclusive, 
in  those  peace  times  was  27,210,181  tons.  The  pro- 
duction in  the  first  year  of  the  war  mounted  up  to 
45,800,000  tons.  The  average  production  of  pig  iron 
from  1907  to  1916  inclusive  was  27,184,330  tons.  In 
the  first  year  of  war  it  increased  to  39,000,000  tons. 
In  1917  the  total  coal  mined  in  the  United  States  was 
654,728,000  tons,  as  against  an  average  of  something 
over  500,000,000  tons  for  the  previous  ten  years. 

These  increases  in  basic  materials  are  even  surpassed 
by  the  record  in  the  construction  of  ships,  the  produc- 
tion of  munitions,  and  other  war  material,  evidencing 
that  labor,  reduced  by  hundreds  of  thousands  of  enlist- 
ments, has  surpassed  in  production  the  high  water 
record  of  all  past  history.  This,  too,  in  the  face  of 
the  desertion  of  the  I.  W.  W.  leaders  and  certain  other 
slackers  who  took  advantage  of  higher  wages  to  reduce 
the  working  days,  failing  to  realize  that  every  able- 
bodied  man  should  give  himself  as  continuously  and 
effectively  in  forging  weapons  for  the  men  in  the  army 
and  navy  as  do  the  men  in  the  trenches  or  on  the  deck 
of  fighting  ships. 

NEW   CONDITIONS    FOR   WAGE-EARNERS   AFTER    WAR 

The  world  after  peace  .  .  .  will  not  go  back  to  condi- 
tions such  as  existed  prior  to  our  entrance  into  the 
mighty  struggle.  The  people  will  take  on  new  dignity. 
What  labor  earns  will  find  its  way  into  the  pockets  of 
labor.  New  conditions  will  impose  new  duties.  States- 
manship of  vision  will  create  new  opportunities  for 
American  commerce  and  guarantee  to  labor  the  bread 
it  has  earned.  Political  shibboleths  that  men  heeded 


Capital  and  Labor  After  the  War      229 

in  1916  are  as  dead  as  the  mummies  of  Egypt,  and  public 
men  who  try  to  galvanize  them  will  be  interred  in  the 
catacombs  that  overlook  Salt  River. 

Trade  and  commerce  and  finance  will  seek  new  and 
broader  fields  and  men  and  nobler  standards.  The 
large  returns  from  farm  and  factory  will  not  go  to  the 
few,  but  will  be  apportioned  to  men  of  brain  and  brawn 
in  proportion  to  the  value  of  their  contribution.  There 
will  be  a  more  equitable  division  between  capital  and 
labor.  But  no  Bolshevism,  no  failure  to  protect  alike 
property  and  labor,  no  class  domination  that  lends  itself 
to  injustice  or  wrong,  can  flourish  on  this  continent. 
Justice  presides  over  both  the  rights  of  man  and  his 
rights  of  property.  There  will  be  no  place  in  this  new 
world  for  the  leadership  either  of  timid  men  or  those 
who  grasp  at  the  shadows  of  issues  which  the  war  has 
relegated  to  the  scrap  heap. 

OUR  FIRST   IMPERATIVE   DUTY 

We  have  had  but  one  principle  since  the  President 
in  the  halls  of  Congress  gave  expression  to  the  national 
conviction  that  the  course  of  the  German  Empire  de- 
manded that  America  must  make  the  world  safe  for 
democracy.  We  are  enlisted  with  all  that  we  have  and 
are  until  the  objects  stated  by  the  President  shall  have 
been  achieved. 

And  then  —  and  then,  what?  What  shape  will  our 
after  the  war  radicalism  take?  No  man  is  wise  enough 
to  prophesy ;  but  it  is  safe  to  say  our  first  and  imperative 
duty  here  in  America  is  to  make  democracy  safe  for 
the  world. 

It  would  be  the  tragedy  of  tragedies  if  after  our  sacri- 


230  Reconstructing  America 

fices  to  make  the  world  safe  for  democracy  our  democracy 
would  not  be  of  a  brand  to  bless  the  world.  It  must 
be  purged  of  all  class  distinction,  of  every  vestige  of 
privilege,  of  every  hoary-bearded  tradition  that  fetters 
justice.  It  must  be  a  democracy  such  as  Jefferson 
formulated  and  Lincoln  enforced.  Its  standard  must 
be  equal  rights  to  all,  special  privileges  to  none.  But 
this  generation  must  live  in  the  spirit  of  Jefferson  and 
Lincoln  and  not  be  bound  by  policies  which  suited  their 
day.  We  will  not  be  called  upon  to  fight  primogeniture 
and  the  union  of  Church  and  State  and  foreign  control 
which  Jefferson  successfully  opposed.  Human  slavery, 
which  Lincoln  ended  for  the  good  of  both  races  and  the 
glory  of  his  country,  no  longer  needs  to  be  opposed. 
But  let  us  not  doubt  that  there  will  be  lions  in  our  path 
if  we  tread  the  hard  road  of  duty.  Profiteers  in  war, 
worse  than  slackers  and  cowards,  will  not  be  easily 
routed  in  peace. 

GIANT  EVILS  WILL  FOLLOW   WAR 

Invoking  the  spirit  of  patriotism,  giant  evils  will 
follow  this  as  all  other  wars.  Eternal  vigilance  will 
still  be  the  price  of  liberty.  Men  more  careful  to  pre- 
serve the  status  quo  of  1914  than  to  secure  equal  and 
exact  justice  will  not  be  wanting.  There  will  be  as 
much  need  for  courage  to  fight  for  real  democracy  when 
peace  smiles  as  there  is  need  now  to  oppose  German 
aggression.  But  the  spirit  of  hostility  to  absolutism 
will  burn  strong  in  the  breasts  of  the  millions  of  the 
young  men  returning  victorious  from  the  Rhine. 


Capital  and  Labor  After  the  War     231 

IV 

AMERICAN  COMMON  SENSE  TOWARD  CAPITAL  AND 
LABOR 

BY  JAMES  SPEYER 
Bead  of  the  International  Banking  House  of  Speyer  &•  Company 

,  It  has  come  to  be  recognized  that  labor  wages  is 
not  regulated  by  supply  and  demand.  Labor  is  per- 
formed by  men  and  women  who,  as  living  human  beings, 
are  entitled  to  considerations  outside  of  "supply  and 
demand"  if  the  well-being  of  the  nation  is  to  be  ad- 
vanced. Of  course,  in  this  age  of  keen  international 
competition  in  industry,  it  will  be  difficult  for  any  one 
country  to  set  up  a  higher  standard  of  living  and  main- 
tain it  permanently  by  itself.  It  is,  therefore,  much 
to  be  desired,  in  the  interest  of  all,  and  especially  of 
the  working  people,  that  at  the  great  international 
conference  the  industrial  nations  may  reach  binding 
agreements  as  to  the  hours  of  work  per  day  or  per 
week,  as  to  minimum  wages,  as  to  women  and  child 
labor,  etc.,  because  it  seems  to  me  that  only  in  this  way 
can  such  a  standard  of  living  of  the  working  people 
be  established  and  maintained  by  any  one  country 
without  its  industries  being  beaten  by  those  of  countries 
with  less  advanced  humanitarian  views. 

The  last  fifty  years  have  seen  a  marvelous  growth  of 
industry  and  the  development  of  mechanical  devices, 
resulting  in  great  material  benefits  to  the  masses  of 
the  prople.  The  next  fifty  years,  I  believe,  will  witness 
a  great  development,  through  legislation  or  otherwise, 
in  the  well-being,  as  regards  health,  safety  and  general 
living  conditions,  of  the  individual  employed  in  industry. 


232  Reconstructing  America 

VAST  ECONOMIC  WASTE 

It  is  to  be  regretted  that  during  the  last  four  years  capi- 
tal and  labor  have  had  to  be  largely  employed  to  produce 
things  which  are  of  little  or  no  economic  value  —  in 
fact,  to  produce  things  and  material  destined  to  destroy 
human  life  and  property.  This  destruction  has  been 
appalling,  and  it  will  take  the  combined  efforts  of  both 
labor  and  capital,  for  many  years,  to  make  good  what  has 
been  thus  wasted. 

For  the  present  not  only  labor  but  also  capital  will 
command  a  higher  price. 

As  the  term  "labor"  is  commonly  used  to  represent 
millions  of  working  men,  so  it  should  be  borne  in  mind 
that  the  word  " capital"  does  not  really  represent  a 
thing,  nor  a  few  very  wealthy  men,  but  it  means  in 
civilized  countries  the  savings  of  men  and  women  of 
comparatively  moderate  means,  which  they  have  in- 
vested, either  directly  or  indirectly,  in  industrial  under- 
takings giving  employment  to  millions. 

Those  investors,  be  they  savings  bank  depositors,  life  in- 
surance policyholders,  owners  of  railroad  and  public  utili- 
ties securities,  etc.,  be  they  large  or  small,  have  during  the 
last  few  years  not  been  shown  as  much  consideration  as  is 
necessary  for  the  country's  prosperity  and  development. 

I  think  the  people  of  our  country  have  come  to  realize 
that  there  must  be  a  change,  because  it  is  impossible  for 
"  labor  "to  prosper  if  "capital "  is  deprived  of  its  fair  return. 
The  higher  cost  of  the  necessities  of  life,  which  was  a  good 
and  sufficient  reason  for  raising  wages,  also  is  a  good  and 
sufficient  reason  to  insure  to  those  who  have  been  able  to 
save  and  invest  a  higher  return  on  their  investment. 


Capital  and  Labor  After  the  War      233 

EMPLOYMENT  FOR  WAR  WORKERS 

The  problem  of  finding  employment  for  men  and 
women  who  were  temporarily  working  in  war  industries 
and  for  the  men  who  have  been  serving  the  country  in 
our  army  and  navy  is  now  uppermost  in  people's  minds. 
In  this  connection  the  improvement  of  railroad  credit 
and  encouragement  of  capital  to  be  invested  in  this 
important  industry  are  of  prime  importance.  We  all 
know  that  there  have  been  periods  in  our  country's  life 
when  every  one  who  was  willing  to  work  found  employ- 
ment at  good  wages,  when  there  was  in  fact  a  labor  short- 
age. During  the  last  four  years  we  have  developed  on 
a  large  scale  a  new  industry,  viz.,  shipbuilding,  while 
at  the  same  time  the  usual  flow  of  immigration  has 
entirely  stopped. 

We  all  realize  that  our  country  comes  out  of  the  war 
with  enhanced  prestige  —  the  great  creditor  nation 
of  the  world.  Therefore,  considering  our  country's 
natural  resources  and  our  people's  energy,  there  is  no 
reason  why  there  should  not  be  work  for  all,  provided 
we  follow  the  common  sense  policy  to  let  capital,  as 
well  as  labor,  have  a  fair  return. 

Every  American  has  more  reason  than  ever  before 
to  look  with  confidence  to  the  future  in  the  belief  that 
American  common  sense  and  fairness  will  prevail  toward 
both  "  capital "  and  "  labor,"  so  that,  while  we  have  peace 
abroad,  we  also  shall  have  peace  at  home. 


234  Reconstructing  America 


AN  AUTOCRACY  OF  ANARCHY  IMPENDING 

BY  HON.  WILLIAM   B.  WILSON 
Secretary  of  Labor 

There  remains  the  acute  problem  of  reestablishing 
ourselves  upon  a  normal  post-war  basis  —  the  problem 
of  the  demobilization  not  alone  of  our  army  and  navy, 
but  also  of  our  great  war  industries.  The  solution  would 
be  easy  enough  if  every  man  were  impressed  with  the 
personal  importance  of  getting  his  own  establishment 
going.  Many  men  feel  that  it  is  the  part  of  wisdom 
to  wait  until  there  is  an  abatement  in  the  present  high 
cost  of  production,  until  labor  and  material  become 
cheaper,  and  that  reasoning  seems  fairly  sound. 

But  I  am  firmly  convinced  that  there  will  not  be 
more  than  from  four  to  six  months,  at  most,  between 
the  time  of  the  signing  of  the  armistice  and  the  time 
when  we  shall  get  back  into  our  full  post-war  swing 
of  industrial  activity  and  prosperity. 

LABOR'S  GREATEST  EARNINGS 

Labor's  earnings  during  the  war  period  have  been 
greater  than  ever  before.  Much  of  those  earnings  will  now 
be  devoted  to  the  improvement  of  households  and  to  the 
development  and  improved  equipment  of  farms  as  they 
never  have  been  improved  and  equipped  before,  and  all 
this  is  bound  to  create  a  strong,  healthy  domestic  demand. 

Looking  abroad,  the  door  is  open  and  waiting  for 
us  to  enter  into  the  great  markets  of  South  America. 
Germany  has  had  a  large  trade  there,  but  she  will  no 


Capital  and  Labor  After  the  War      235 

longer  have  a  trade  there.  It  will  be  diverted  to  other 
countries,  and,  if  American  business  men  exercise  a  fair 
degree  of  foresight,  a  reasonable  share  of  it  ought  to 
come  to  us. 

With  those  things  before  us,  if  we  can  only  tide  our- 
selves over  the  coming  few  months,  we  have  before  us, 
I  feel  sure,  eight  or  ten  years  of  unprecedented  industrial 
activity.  It  would  be  a  grave  error  to  make  any  serious 
effort  to  force  down  rates  of  wages  now.  I  fear  such 
an  attempt  would  be  so  seriously  resisted  as  to  interfere 
materially  with  that  return  of  prosperity.  I  believe 
the  whole  issue  is  to  a  great  extent  a  matter  of  restored 
and  maintained  confidence  on  the  part  of  our  people. 

SEES   AUTOCEACY   OF  ANARCHY 

The  autocracy  of  imperialism,  which  is  dead,  is  not 
the  only  form  of  autocracy.  We  see  in  Russia  the 
manifestations  of  the  autocracy  of  anarchy,  which,  like 
that  of  imperialism  and  militarism,  is  the  forcing  of 
the  will  of  a  minority  upon  that  of  the  majority.  If 
we  should  have  any  long  sustained  period  of  industrial 
unrest,  if  there  should  be  a  large  factor  of  unemploy- 
ment, no  man  may  say  where  it  might  lead,  whether 
to  a  recurrence  of  such  horrors  as  those  of  the  French 
revolution  or  to  the  spread  of  the  menace  of  Russian 
Bolshevism.  Unless  we  can  successfully  tide  over  these 
coming  few  months,  we  are  facing  imminent  danger  that 
the  ideals  of  the  restless  few,  who  are  not  a  majority, 
may  become  as  serious  a  peril  as  was  the  menace  of 
military  autocracy.  My  appeal  to  all  the  people  at 
this  critical  time  is:  Get  your  business  going  and 
keep  it  going. 


236  Reconstructing  America 

VI 

THE  FEDERAL  EMPLOYMENT  SERVICE 

BY  HENRY   BRUERE 

Unemployment  has  always  been  a  national  problem, 
but  the  best  that  we  have  ever  done  before  was  to  try 
to  solve  it  locally.  Of  course  that  couldn't  be  done. 
What  is  more,  it  cannot  be  solved  simply  by  an  employ- 
ment service,  which  was  the  very  most  we  had  hoped 
for  in  the  past. 

Now  we  are  coming  much  nearer  to  the  solution  than 
any  one  could  have  dreamed  five  years  ago ;  for  the 
Employment  Service  of  to-day  is  not  a  thing  by  itself ; 
it  is  a  vital  part  of  our  new  industrial  administration. 

A   NEW  INDUSTRIAL  ADMINISTRATION 

That  phrase  "industrial  administration"  is  a  phrase 
which  Americans  must  learn  to  know.  Through  the 
War  Industries  Board,  the  War  Labor  Board,  the  War 
Labor  Policies  Board,  the  Federal  Trade  Commission, 
the  Railroad  Administration,  and  other  agencies,  help- 
less America  was  enabled  to  help  defeat  the  greatest 
military  power  in  the  world.  Our  old  industrial  sys- 
tem broke  down,  primarily,  because  it  wasn't  a  system. 
It  was  a  great  aggregation  of  competitors,  each  bidding 
for  patronage  and  each  bidding  for  its  quota  of  labor 
and  supplies  in  the  open  market  regardless  of  the  national 
need  to  be  served.  In  order  to  fight  effectively  abroad 
these  competitors  had  to  organize  and  coordinate  their 
efforts  here ;  and  they  did  so  under  one  industrial 
administration  with  amazing  success. 


Capital  and  Labor  After  the  War      237 

And  this  is  the  secret  of  that  success.  While  industry 
was  seemingly  being  governed  by  Government  boards, 
it  was  not  being  governed  either  by  politicians  or  merely 
by  military  experts.  The  War  Industries  Board,  for 
instance,  was  composed  of  the  essential  war  industries. 
It  received  its  commission  from  the  President ;  but 
it  received  its  real  power  and  effectiveness  from  the 
industries  themselves.  There  were  no  arbitrary  rul- 
ings. There  was  instead  a  careful  ascertaining  of  the 
facts,  and  when  the  facts  were  known  there  was  a 
general  willingness  to  abide  by  them.  This  is  a  far 
different  thing  from  the  situation  which  results  when 
the  best  possible  intentioned  commission  steps  in  from 
the  outside  and  begins  to  lay  down  rules  upon  which 
industrial  groups  are  supposed  to  work. 

The  National  War  Labor  Board  likewise  was  com- 
posed of  employers  and  employees.  The  results  ob- 
tained could  not  have  been  obtained  by  the  most  scientific 
corps  of  experts  making  arbitrary  rulings.  The  whole 
industrial  administration  was  not  a  case  of  political 
power  dictating  to  industry.  It  was  a  case  of  Ameri- 
can industry  cooperating  democratically  with  political 
power  for  one  common  supreme  end. 

The  war  is  over,  but  that  cooperation  is  not.  It  has 
proved  too  useful  to  be  abandoned.  Other  agencies 
will  doubtless  be  instituted  better  adapted  to  the  special 
needs  of  peace,  but  the  principle  of  cooperation  will 
remain. 

DEMOCRACY   IN  OUR  INDUSTRIAL  LIFE   NEEDED 

We  have  come  to  the  conclusion  that  there  isn't 
going  to  be  any  radical,  quick  reconstruction  in  America. 


238          .    Reconstructing  America 

The  tendency  is  toward  reaction  back  to  pre-war  condi- 
tions. We  have  discovered,  however,  that  there  is  a 
tremendous  reserve  of  capacity  and  a  tremendous 
deficiency  in  opportunity  and  enjoyment  in  the  human 
race.  There  isn't  the  slightest  justification  for  con- 
tinuing involuntary  poverty  in  America  after  the  war. 
The  only  solution  of  this  is  the  abolishment  of  misery 
by  the  introduction  of  democratic  principles  into  our 
industrial  life.  In  order  to  get  adequate  benevolence, 
even  under  the  emotions  of  war,  we  were  driven  to  the 
system  of  "drives"  to  get  money  for  war  relief.  We 
cannot  depend  upon  the  good  will  of  men  entirely. 
We  must  promote  a  form  of  cooperation  in  industry, 
by  which  each  one  is  capable  of  enforcing  his  own  views 
regarding  individual  needs  and  in  which  every  one  has 
the  right  to  speak  from  his  own  viewpoint. 

There  is  more  and  more  recognition  of  the  many 
ways  in  which  organizations  of  employers  and  employees 
can  work  in  harmony.  So  far,  in  spite  of  the  prediction 
that  peace  would  precipitate  a  panic,  we  have  been 
able  to  find  jobs  in  the  peace  industries  somewhat 
faster  than  the  war  industries  have  released  their 
men.  With  an  all-around  industrial  administration, 
a  government  body,  but  non-political  and  non- 
partisan  and  composed  of  actual  representatives  of 
all  branches  of  industry,  there  seems  to  be  no  reason 
why  final  peace  should  bring  anything  short  of  general 
prosperity. 


Capital  and  Labor  After  the  War      239 

VII 

NEW  LABOR  IDEAS  TAUGHT  BY  WAR 

BY  FELIX  FRANKFURTER 

Secretary  of  the  War  Labor  Board 

The  labor  problem  has  for  years  past  been  taken  as 
a  phase  of  political  life,  a  question  that  could  be  taken 
up  as  a  party  platform  and  settled  definitely  for  all 
time.  It  is  not  that.  All  the  questions  and  problems 
that  continually  come  into  play  and  demand  attention 
in  the  political  life  of  the  nation  are  equally,  if  not  to  a 
greater  extent,  the  questions  and  problems  that  come 
into  play  in  the  industrial  life  of  the  nation.  They 
are  growing  and  changing  questions  and  problems  and 
so  need  growing  and  changing  answers  and  solutions. 
Let  us  take  the  labor  problem,  which  I  maintain  is  not  a 
situation,  but  a  current. 

Almost  overnight  Uncle  Sam  became  the  greatest  em- 
ployer in  the  world.  The  change  came  so  quickly  and 
the  demands  were  so  great  that  he  at  once  had  to  give 
a  practical  demonstration  of  his  abilities.  He  wasn't 
interested  in  theories,  he  wasn't  keen  on  airy  spec- 
ulation on  past  methods  and  their  results,  on  autocratic 
rule  or  democratic  rule ;  he  was  met  with  the  demand 
to  turn  out  goods.  What  faced  him  was  the  immediate 
stabilization  of  industry. 

HOW   UNCLE    SAM   STABILIZED   INDUSTRY 

He  did  it.  In  order  to  insure  continuity  of  output 
and  increasing  quantity  of  output  he  had  to  do  it.  That 
meant  that  he  had  to  lay  down  standards  of  various 


240  Reconstructing  America 

kinds.  The  questions  of  wages,  hours,  employment 
of  women  and  children,  environmental  conditions,  and 
finally  the  mode  of  dealing  with  the  mass  of  workers, 
all  of  these  had  to  be  solved.  The  last  involved  the 
right  of  labor  to  organize,  a  question  that  had  long  been 
of  paramount  importance  in  the  industrial  life  of  the 
nation.  All  these  things  received  thought  and  attention 
and  were  studied  in  a  scientific  way.  I  emphasize, 
scientific  way.  It  was  no  longer  a  question  of  party 
bickerings,  consisting  of  abstruse  issues  of  right  and 
wrong,  it  was  a  question  of  immediate  output  with 
as  little  interruption  as  possible.  Both  sides  to  be 
affected  had  hearings,  all  points  advanced  were  con- 
sidered, and  no  steps  involving  the  well-being  of  either 
side  were  taken  without  the  deliberate  consent  of  both. 
As  a  result  there  was  a  dependability  in  output  and 
heartiness  of  energy  along  production  lines  that  had 
previously  been  sorely  lacking.  Uncle  Sam  proved 
that  with  the  element  of  profit,  or  perhaps  I  should  say 
"profiteering,"  withdrawn,  industries  could  be  carried 
on  to  the  perfect  satisfaction  of  all  concerned. 

With  the  war  having  come  to  a  close,  however,  there 
arises  the  impending  danger  of  things  going  back  to 
their  former  state.  Whether  or  not  Uncle  Sam  will 
continue  to  be  the  great  employer  of  labor  that  he  has 
been  in  the  past  year  and  a  half  has  not  yet  been  decided. 
But  there  is  no  gainsaying  the  fact  that  something  very 
worth  while  along  the  field  of  industry  has  been  accom- 
plished by  him.  Even  should  he  not  continue  in  the 
role  of  employer  there  is  no  reason  in  the  world  why  what 
he  has  already  done  should  not  be  taken  up  by  the  mass 
of  employers  of  the  nation.  .  .  , 


Capital  and  Labor  After  the  War      241 

That  is  more  difficult  than  it  sounds.  There  are 
many  things  to  be  considered  in  the  work  of  stabilizing 
labor,  especially  when  the  industries  are  not  gathered 
under  one  head  as  has  been  true  during  the  period  of  war. 
First  of  all,  it  seems  to  me  most  important  that  the 
United  States  Government  continue  to  be  a  clearing 
house  for  the  information  and  settlement  of  industrial 
problems.  What  the  Department  of  Agriculture  does 
for  the  farmer,  the  Department  of  Labor  can  be  made 
to  do  for  the  employer  and  employee.  All  the  informa- 
tion on  the  labor  situations  throughout  the  world,  the 
experiments  and  legislations  of  the  more  progressive 
countries,  the  steps  taken  by  such  countries  as  England, 
Australia,  etc.,  added  to  the  knowledge  gained  by  our 
own  country  through  the  work  of  the  National  War 
Labor  Board,  should  be  at  the  disposal  of  those  who 
desire  to  base  their  claims  on  a  scientific  study  of  the 
problem.  As  the  matter  now  stands,  the  control  of 
the  field  of  industry  is  left  uncovered.  Problems  are 
patched  up  when  they  are  met  in  an  unscientific  hit-or- 
miss  manner.  As  a  result,  the  same  problem  comes  to 
light  again  just  as  soon  as  the  patch  wears  out.  .  .  . 

Industry,  in  order  to  put  itself  on  some  stable  basis, 
must  organize  in  a  way  that  it  has  never  before  been 
organized.  By  this  I  mean  that  not  only  are  the  workers 
to  organize,  but  the  management  as  well,  and  with  the 
workers.  When  the  Government  decided  to  take  over 
the  various  industries  under  its  control  it  was  met  by 
the  snag  of  finding  no  voice  to  speak  for  an  industry. 
There  were  things  to  be  discussed,  Questions  to  be  an- 
swered, situations  to  be  cleared,  but  there  was  no 
organized  group  to  take  upon  itself  the  responsibility 


242  Reconstructing  America 

of  talking  for  the  whole.  They  were  problems  of 
industry  wrhich  only  those  having  a  knowledge  of  that 
industry  could  solve.  It  was  no  field  for  outside, 
dilettante  interest.  This  lack  of  proper  representation 
under  the  increasingly  hectic  conditions  of  labor  is  true 
to  an  even  greater  extent  to-day. 

Stability  of  labor  is  not  a  terminus,  but  a  process, 
a  continuity  of  state  of  mind.  The  management  as 
well  as  the  workers  must  be  educated  to  meet  the  grow- 
ing and  changing  questions  of  production  and  distribu- 
tion of  production.  What's  more,  they  must  meet 
them  together.  It  is  not  sufficient  to  take  up  a  problem 
from  one  side  alone.  If  there  is  a  demand  along  the 
line  of  a  certain  industry  the  employer  alone  cannot 
meet  that  demand.  He  must  associate  himself  with 
the  workers  in  ascertaining  the  scope  and  extent  of 
conditions  that  govern  the  factors  in  his  industry. 

OPPORTUNITY   TO   GROW   INDUSTRIALLY 

The  United  States  to-day  has  an  opportunity  to 
grow  industrially  such  as  has  never  before  been  given 
to  any  nation.  There  is  an  ever-increasing  demand 
for  goods  and  an  ever-growing  market  for  them.  We 
can  meet  that  demand  and  fill  those  markets  only  on 
the  one  condition  that  there  is  a  different  spirit  in  indus- 
try. The  hostility  and  resentment  and  enmity  toward 
the  heads  of  organizations  must  by  a  more  scientific 
process  of  education  grow  into  one  of  mutual  under- 
standing. There  is  no  getting  away  from  the  fact  that 
at  the  present  time  the  feeling  among  the  workers,  of 
America  is  bad.  It  is  hostile  to  growth,  and  has  a  decided 
tendency  toward  desertion  of  rule  and  resistance  of 


Capital  and  Labor  After  the  War      243 

rule.  There  is  a  desire  on  their  part  for  a  transference 
of  powers.  There  is  justice  in  the  desire,  but  the  point 
is  to  determine  that  transference  on  a  basis  of  a  well- 
planned  scientific  process  instead  of  one  of  force. 

It  all  boils  down  to  a  demand  on  the  part  of  the  workers 
that  they  be  allowed  to  find  themselves  economically. 
They  are  conscious  of  a  desire  for  and  a  sense  of  fair 
dealing  in  matters  which  intimately  affect  them.  There 
is  a  danger  of  having  that  sense  function  blindly 
without  fully  understanding  the  underlying  conditions 
that  govern  the  labor  problems.  In  most  cases  there 
is  an  appreciation  of  things  as  they  are  outwardly, 
but  no  understanding  of  the  inner  machinery  that  has 
made  them.  That  is  a  human  failing.  We  never  un- 
derstand and  cannot  understand  a  situation  until  we 
are  familiar  with  the  elements  that  constitute  it. 

The  answer  to  this  existing  state  of  affairs  is,  of  course, 
the  shop  committees  where  a  representation  of  both 
the  workers  and  the  management  can  meet  on  equal 
grounds  to  discuss  the  factors  entering  into  the  duties 
of  both.  The  workers  must  understand  the  problems 
of  industry,  the  state  of  markets,  the  hazards  of  pro- 
duction, the  risks  of  competition.  In  the  same  manner 
the  heads  of  industry  must  place  themselves  in  the  posi- 
tion of  the  worker  and  understand  his  needs  and  the 
demands  made  upon  him.  There  must  be  an  inter- 
change of  difficulties  and  understanding  of  difficulties 
on  both  sides.  .  .  . 

INDUSTRY   MUST   BECOME   CONSTITUTIONALIZED 

Industry  must  absolutely  become  constitutionalized 
and  placed  on  a  scientific  basis  before  we  can  change 


244  Reconstructing  America 

the  evils  of  autocratic  rule  and  its  natural  component, 
the  anarchy  of  strikes.  The  Government  of  the  United 
States  has  made  a  start  along  this  line.  -We  have  got 
to  keep  right  on  going  in  the  same  direction  if  we  are 
to  find  ourselves  industrially.  There  are  no  permanent 
laws  that  we  can  make.  There  are,  however,  experi- 
ments that  we  can  try.  What  is  true  of  our  political 
growth  must  also  hold  true  of  our  industrial  growth. 
Different  situations  demand  different  treatment.  We 
have  no  permanent  and  rock-bound  answers  to  the 
questions  of  a  national  tariff,  of  growth  of  railroads, 
of  control  of  natural  resources.  We  are  constantly 
giving  these  matters  thought  and  study.  Different 
periods  demand  different  treatment.  The  same  is  true 
of  our  industries.  England  and  Australia  have  awak- 
ened to  the  need  of  taking  such  a  national  attitude 
toward  the  labor  problem.  They  expect  to  find  the 
same  phenomena  in  the  progress  of  industrial  freedom 
as  they  found  in  the  progress  of  political  freedom.  They 
expect  to  follow  the  same  course  of  experimentation 
in  the  industrial  life  of  the  nation  that  naturally  has 
been  and  is  a  feature  in  the  political  life.  It  will  be  a 
matter  of  trying  out,  rejecting,  or  accepting,  but  always, 
always  growing. 

We  must  do  the  same.  The  thing  must  come  from 
within  the  ranks  of  both  factors  in  the  controversy. 
That  is  the  answer  to  Bolshevism  in  America.  American 
industry  must  be  organized  in  a  way  to  prevent  exploita- 
tion of  labor.  The  workers  will  not  keep  silent  under  that. 
Given  the  proper  opportunity,  however,  labor  can  be 
stabilized  and  organized  in  the  same  manner  as  we  have 
stabilized  and  organized  the  political  life  of  the  country. 


Copyright   l>y   I'luk-rwood   &    I'mli-i  wood,    \.    V. 
S  VM  ri-.I.    C.OMl'KKS 


Capital  and  Labor  After  the  War      245 

VIII 

A  MOVEMENT  OF  "CONSTRUCTIVE  CHARACTER" 

BY  SAMUEL   GOMPERS 

In  countries  which  have  been  ruled  from  the  top 
downwards  without  any  regard  for  the  masses,  we  find 
there  a  convulsion  occurring  in  blood  shedding  and  mur- 
der. In  a  country  which  gives  the  opportunity  for 
freedom  —  because  no  country  can  give  freedom  —  it 
devolves  upon  the  people  having  the  opportunity  to 
take  advantage  of  it  and  to  exercise  freedom,  and  a 
people  failing  to  exercise  that  freedom  write  themselves 
down  as  incompetent. 

In  our  country  we  have  a  labor  movement  founded 
upon  the  historic  development  of  the  conditions  and 
industry  and  commerce  of  our  country. 

Now,  the  American  labor  movement,  as  represented  by 
the  American  Federation  of  Labor  and  our  trade-unions, 
is  this  :  —  We  believe  in  progress ;  we  believe  in  making. 
We  believe  that  all  of  the  fruits,  the  results  of  the  genius 
of  the  past  ages  and  of  to-day,  do  not  belong  to  any  partic- 
ular class.  That  it  belongs  in  truth  as  a  fair  share  to  every 
man  who  gives  service  to  society  and  aids  civilization. 

It  is  a  question  of  dealing  with  such  a  movement 
as  represented  by  the  American  Federation  of  Labor, 
the  American  trade-union  movement,  or  to  deal  with  a 
body  of  irreconcilables  and  irresponsibles. 

If  we  are  not  on  the  right  track,  then  those  who  repre- 
sent the  wildest  orgy  of  destruction  and  have  no  consid- 
eration for  the  rights  of  individuals,  they  will  come  to 
the  front,  and  it  is  a  matter  of  choice  as  dealing  with 


246  Reconstructing  America 

such  elements  or  dealing  with  the  constructive  forces 
of  the  organized  labor  movement  of  the  country. 

LABOR  HAS  ADVANCED 

I  am  an  optimist,  somehow  or  other.  I  have  great 
hopes.  I  have  seen  events  which  were  deemed,  twenty 
years  ago,  as  impossible  and  yet  they  have  been  achieved. 
Now  let  us  view  what  we  have  to  meet,  in  order  to 
avoid  the  turning  on  of  the  red  light  of  the  danger 
signal. 

It  is  true  that  certain  advantages  have  come  to  the 
workers  by  reason  of  the  war.  Now,  it  isn't  good  to 
give  men  the  opportunity  for  freedom  and  then  try  to 
take  it  away  from  them.  The  working  people  of  the 
United  States  have  learned  what  freedom  means.  It 
doesn't  appeal  to  them  only  on  Independence  Day. 
It  appeals  to  them  every  day  in  the  year. 

The  inalienable  right  of  man  to  life,  liberty,  and  the 
pursuit  of  happiness  means  something.  The  aspira- 
tion is  for  a  better  standing,  a  better  status,  something 
better  in  life.  Through  what  instrumentality  can  the 
workers,  the  masses  of  the  workers,  as  workers,  gratify 
their  aspiration  except  through  their  wages? 


CHAPTER  XII 

IMMIGRATION  AND  THE  PROBLEM  OF  WOMEN  IN 
INDUSTRY 

I 

NEED  WE  FEAR  IMMIGRATION? 

•  BY  HON.  ANTHONY  CAMINETTI 
Commissioner  General  of  Immigration 

ALL  prophecy  right  now  can  consist  of  little  more  than 
conjecture,  and  by  the  nature  of  conditions  must  be 
largely  futile.  This  is  particularly  true  of  prophecies 
as  to  immigration,  for  we  do  not  know  what  the  policies 
of  governments,  including  our  own,  will  be,  nor,  more 
important  still,  what  effect  the  war  and  its  aftermath 
will  have  on  the  instincts  and  inclinations  of  those 
people  who  might  be  classed  as  potential  immigrants 
to  our  country. 

Shall  our  pre-war  record  of  immigration  be  reestab- 
lished or  exceeded,  or  will,  as  some  predict,  the  tide 
turn  the  other  way  and  America  become  an  emigrant 
instead  of  an  immigrant  nation?  There  is  but  one 
concrete,  non-conjectural  answer,  which  is,  "We  do 
not  know." 

No  doubt  the  effect  of  the  war  on  the  migration  and 
distribution  of  people  will  be  far-reaching,  but  just  how 
no  one  can  in  detail  tell  with  any  degree  of  precision. 

One  would  have  thought  naturally  that  many  Euro- 
peans would  have  endeavored  to  escape  the  actual 

247 


248  Reconstructing  America 

fires  of  war  by  emigrating  to  America  or  other  countries 
far  from  the  war  zone.  Of  course  shipping  and  other 
conditions  made  emigration  difficult.  However,  it 
would  seem  that  the  war  tended  to  depress  rather  than 
to  stimulate  the  instinct  of  migration  among  the  peoples 
most  vitally  affected  by  the  violence  of  the  conflict. 

Immigration  to  this  country  from  Europe  fell  off 
tremendously  as  soon  as  the  war  began  in  1914,  and 
continued  to  decline  more  or  less  steadily  until,  during 
the  fiscal  year  ending  June  30,  1918,  there  was  but  little 
net  gain  in  our  population  from  that  source.  In  fact 
during  that  year  only  110,618  immigrant  aliens  entered 
the  United  States  from  all  sources,  while  94,585  immi- 
grant aliens  left  the  country  during  the  same  period. 
This  left  a  net  gain  of  less  than  18,000. 

The  decade  preceding  the  opening  of  the  European 
war  gave  us  annually  an  average  immigration  exceeding 
one  million,  and  the  net  increase  in  population  from 
immigration  sources  in  the  fiscal  year  ending  June  30, 
1914,  was  769,276. 

WHAT   INFLUENCES   IMMIGRATION 

Speaking  broadly  two  considerations  underlie  nearly 
all  alien  immigrations : 

1.  Social  conditions. 

2.  Economic  conditions. 

The  first  brought  about  the  founding  and  original 
development  of  our  country. 

The  second  accounted  largely  for  the  phenomenal 
growth  in  population  characterizing  the  last  fifty  years 
of  our  history  and  upon  which  was  builded  our  modern- 
day  industrial  greatness. 


Immigration  and  Women  in  Industry 

Whatever  changes  the  war  will  cause,  it  may  be  as- 
sumed that  the  migration  of  peoples  will  continue  to  be 
influenced  as  heretofore  by  social  and  economic  condi- 
tions, barring,  of  course,  artificial  restraints  or  induce- 
ments. 

Therefore,  immigration  to  the  United  States  or  emigra- 
tion from  the  United  States  in  coming  years  is  apt  to 
depend  substantially  on  the  social  and  economic  condi- 
tions existing  in  this  and  those  other  countries  whose 
citizens  are  admissible  as  immigrants. 

Thus  the  effect  of  the  war  on  immigration  will  be  to 
a  large  extent,  for  some  years,  influenced  by  the  political 
and  economic  changes  caused  or  produced  by  the  war. 

SOCIAL    IMPROVEMENTS    ABROAD    DUE    TO    THE    WAR 

It  is  probable  that  the  war  will  produce  great  social 
improvements  throughout  most  of  Europe.  The  many 
reforms  projected  and  the  promise  of  land  distribution 
to  the  masses  in  many  countries  where  hitherto  it  has 
been  held  by  the  privileged  few  may  retard  the  current 
that  has  been  flowing  towards  us  for  generations ;  and 
yet,  with  all  that,  the  average  European  is  likely  to  con- 
tinue to  look  upon  our  country  as  the  great  haven  of 
freedom.  And  there  is  no  doubt  in  my  mind  that 
many  thousands  will  continue  to  seek  refuge  here  for 
the  same  reasons,  though  they  may  not  be  so  potent, 
as  inspired  the  bulk  of  our  early  immigration. 

Nothing  but  pure  conjecture  can  be  ventured  as  to 
the  future  operation  of  the  other  chief  moving  force  in 
the  tide  of  immigration,  i.e.  economic  conditions. 

If  European  countries  maintain  the  validity  of  their 
war  obligations,  taxes  will  in  future  years  demand  a 


250  Reconstructing  America 

tribute  which  few  persons  until  lately  believed  any 
people  could  bear.  Those  burdens  may  be  reduced 
somewhat  through  lessened  expenditures  on  military 
establishments,  more  economical  governments,  and  more 
equitable  distribution  of  the  taxes,  but  that  they  will 
be  far  beyond  those  of  ante-bellum  days,  then  consid- 
ered highly  oppressive,  is  certain. 

Yet  we  must  realize  that  the  citizens  of  a  number  of 
European  countries  (England  of  course  is  included  in 
this  statement)  bore,  during  the  past  four  years,  burdens 
far  weightier  than  any  they  can  expect  for  the  future ; 
and  that  those  burdens  were  accompanied  in  some  ways 
by  a  degree  of  individual  prosperity  among  the  masses 
exceeding  any  they  had  ever  enjoyed  in  peace  times. 
That  such  prosperity  was  economically  false,  may  be 
true ;  but  the  fact  is  that,  despite  the  tremendous  tax 
of  active  war,  workmen  in  nearly  all  the  countries 
involved  enjoyed  better  wages,  and  more  favorable 
wage  margins,  than  they  had  been  accustomed  to. 

While  food  conditions  in  Europe  for  the  present  are 
distressing  and  threaten  much  suffering,  such  is  only 
a  temporary  or  passing  factor  which  will  be  removed 
as  peace-time  production  gets  under  way. 

We  must  remember  also  that  the  four  years  of  war 
had  great  adverse  effect  on  the  populations  of  European 
countries.  While  emigration  all  but  ceased,  millions 
were  killed  or  died  from  disease  or  wounds  at  the  front, 
millions  were  incapacitated,  millions  of  civilians  died 
or  were  broken  by  the  strains  and  privations  of  war,  and 
the  birth  rate  dropped  almost  universally. 

Then,  also,  it  may  be  estimated  that  there  is  more  work 
at  hand  in  Europe  for  those  who  survive,,  or  rather  more 


Immigration  and  Women  in  Industry    251 

work  needing  to  be  done,  than  was  the  case  before.  All 
the  vast  destruction  of  war  calls,  at  least  potentially, 
for  replacement,  and  the  deficits  in  the  implements  of 
peace-time  commerce  caused  by  the  deflection  of  energies 
into  the  activities  of  war  need  to  be  replenished.  In- 
deed, the  outlook  for  the  European  workingman  of 
the  peasant  class,  barring  the  period  of  adjustment 
from  war  to  peace,  may  be  much  better  than  it  was 
before  the  war. 

Despite  the  tremendous  destruction  caused  by  the 
war  and  the  huge  debts  incurred  by  the  governments 
involved,  and  the  consequent  possible  increase  in  taxa- 
tion, it  is  not  extravagant  to  imagine  a  post-war  Europe 
offering  to  the  potential  immigrant  attractions  superior 
to  those  he  had  prior  to  1914. 

It  is  also  true  that  the  experience  of  war  intensified 
the  love  of  most  Europeans  for  their  native  lands  and 
gave  added  potency  to  the  feeling  of  Auld  Lang  Syne. 
Many  thousands  who  otherwise  would  have  sought 
new  lands  will  now  find  it  difficult  to  break  the  bonds 
of  blood  and  suffering  which  the  war  has  added  to  the 
usual  ties  binding  them  to  the  environment  of  their 
fathers. 

LARGE   IMMIGRATION   OF    SOLDIERY    POSSIBLE 

Conversely,  the  conditions  mentioned  may  inspire 
many  to  seek  new  scenes  in  which  to  try  and  forget 
the  experiences  they  have  known  and  witnessed ;  and 
this  may  also  affect  the  millions  of  soldiers,  most  of 
whom  —  despite  the  heavy  casualty  lists  —  are  strong 
and  virile,  who  will  be  released  from  the  armies  to  find 
new  life  niches  wherever  they  can.  The  migratory  spirit 


252  Reconstructing  America  , 

has  ever  been  strong  among  veterans  of  wars.  And 
the  veterans  of  the  Allied  armies  are  likely  to  feel  a 
veneration  and  respect  for  America  even  exceeding 
that  always  felt  by  the  masses  in  Europe.  Contact 
with  our  soldiers  no  doubt  has  enhanced  their  visions 
of  American  liberty,  freedom,  and  economic  well-being 
even  beyond  the  reports  of  fact  and  fancy  which  have  ever 
made  America  a  fairyland  of  promise  to  the  peasantry 
of  the  Old  World. 

Of  course  immigrants  will  come. 

Events  only  will  indicate  the  comparative  extent  and 
duration  of  the  movement.  No  doubt  considerably 
more  will  come  as  soon  as  travel  facilities  are  provided 
than  arrived  during  the  active  war  years,  when  as 
stated  the  net  additions  to  our  population  from  that 
source  were  negligible.  Whether  the  tide  will  reach 
former  proportions  depends  upon  circumstances  in 
this  country  and  abroad. 

Whatever  may  happen  in  the  matter  of  volume,  we 
may  be  assured  that  under  existing  laws  there  will  be 
such  an  inspection  that  will  cause  to  be  debarred  all 
those  who  cannot  pass  the  prescribed  tests.  These 
will  include  not  only  all  of  those  physically,  mentally, 
and  morally  not  entitled  to  admission,  but  also  that 
still  more  undesirable  type  commonly  referred  to  as 
anarchists,  who  come  for  license  rather  than  freedom. 

WILL  THE  UNITED  STATES  BECOME  AN  EMIGRANT  NATION  ? 

The  statement  recently  given  public  attention,  that 
the  United  States  is  in  danger  of  becoming  an  emigrant 
nation,  should  net  be  -Liken  seriously.  No  doubt  many 


Immigration  and  Women  in  Industry    253 

residents  of  this  country  of  foreign  nativity  whose  kin 
have  suffered  from  the  privations  and  horrors  of  war 
may  visit  the  place  of  their  birth  to  give  comfort  and 
aid  to  their  loved  ones ;  but  in  my  opinion  a  large  ma- 
jority of  them  will  return  to  the  places  in  which  they 
have  prospered.  No  valid  foundation  has  been  found 
upon  which  to  base  the  radical  change  predicted.  Such 
statements  have  encouraged  plans  to  bring  in  laborers, 
now  prohibited  by  law,  to  fill  the  places  of  those  who 
would  become  part  of  the  emigrating  classes. 

Without  now  taking  up  the  claim  that  more  laborers 
will  be  needed,  whether  or  not  the  prediction  is  verified, 
I  desire  to  call  attention  to  the  fact  that  a  supply  exists 
in  abundance  in  Porto  Rico,  the  Virgin  Islands,  and  the 
Philippines.  What  better  way  could  be  found  to 
build  up  these  possessions  or  what  more  suitable  plan 
be  devised  to  bind  them  to  us,  to  obtain  their  confidence, 
to  secure  their  trade,  and  aid  their  development,  than 
to  engage  a  portion  of  their  people  in  our  industries 
on  the  mainland?  We  would  benefit  them  immensely 
and  also  avoid  the  reappearance  of  a  disturbing  problem 
that  it  has  been  our  hope,  from  economic  and  other 
viewpoints,  had  been  settled  more  than  a  quarter  of  a 
century  ago. 

II 

CLOSING  THE  DOOR  TO  BOLSHEVISM  AND  ANARCHY 

From  the  Report  of  the  Congressional  Committee  on  Immigration  and 
Naturalization 

If  the  bill  framed  by  the  Committee  on  Immigration 
and  Naturalization  passes  both  the  House  and  the 
Senate  and  is  signed  by  the  President  we  shall  have 


254  Reconstructing  America 

no  more  immigration  for  four  years.  This  important 
document  is  a  combination  of  a  bill  introduced  on  Decem- 
ber 10,  1918,  by  Representative  Lufkin,  and  a  bill  intro- 
duced January  20,  1919,  by  Mr.  Burnett.  The  com- 
mittee report  states : 

Section  i  prohibits  immigration  for  four  years  from 
and  after  the  passage  of  the  act,  but  exemptions  are 
made  in  favor  of  aliens  who  have  lawfully  acquired  a 
domicile  within  the  United  States,  so  that  such  persons 
may  reenter  this  country  after  making  visits  abroad ; 
also  in  favor  of  certain  enumerated  classes,  the  list 
corresponding  substantially  to  a  similar  list,  appearing 
in  section  three  of  the  existing  law,  of  exemptions  from 
a  certain  provision  of  the  excluding  clauses  of  said 
section;  also  in  favor  of  certain  specified  relatives  of 
aliens  who  have  heretofore  lawfully  entered,  correspond- 
ing in  most  particulars  to  a  similar  exemption  to  the 
illiteracy  test  of  the  existing  law,  but  including  a  nephew 
or  niece  not  over  fourteen  years  of  age,  if  both  of  his  or 
her  parents  are  dead :  also  in  favor  of  aliens  fleeing 
from  religious  persecution.  Those  fleeing  from  political 
conditions  have  been  deliberately  omitted,  for  if  people 
of  that  class  were  permitted  to  come  in  many  Bolshevists 
and  aliens  of  similar  character  would  claim  admission. 
It  is  provided  further  that  skilled  labor  may  still  be 
imported  under  the  conditions  prescribed  in  the  fourth 
proviso  to  the  third  section  of  the  existing  law,  and 
that  aliens  returning  after  service  in  the  United  States 
army  or  the  army  of  one  of  the  countries  with  wrhich 
the  United  States  has  been  associated  in  the  war,  in 
accordance  with  the  joint  resolution  approved  October 
19  last,  shall  be  admitted. 


Immigration  and  Women  in  Industry    255 


THREE   VITAL  REASONS 

There  are  three  especially  important  reasons,  the 
report  points  out,  for  recommending  the  suspension  of 
immigration  generally  during  the  next  four  years : 

(i)  There  is  already  developing  a  serious  situation 
with  regard  to  unemployment  in  the  United  States, 
and  in  the  committee's  judgment  this  situation  is 
likely  to  grow  worse  rather  than  better  during  the  time 
that  the  industries  of  the  country  are  being  readjusted 
to  peace  conditions ;  (2)  the  soldiers  returning  from 
Europe  for  discharge  and  already  discharged  or  here- 
after to  be  discharged  from  the  camps  within  the  United 
States  must  be  afforded  opportunities  —  ought  to  be 
given  the  first  chance  —  to  obtain  profitable  employ- 
ment, so  that  they  may  be  fitted  back  into  the  industrial 
life  of  the  country  with  fairness  and  justice  to  themselves 
and  with  benefit  to  the  various  communities  involved ; 
and  (3)  it  has  been  demonstrated  during  the  war,  even 
more  clearly  than  ever  before,  that  aliens  have  been 
coming  into  the  United  States  at  a  rate  out  of  all  pro- 
portion to  the  number  that  can  be  advantageously 
assimilated  and  become  a  real  part  of  our  body  politic. 

Section  19  of  the  bill  is  a  slight  amendment  to  the 
first  part  of  Section  20  of  the  immigration  act  of  Febru- 
ary 5,  1917,  and  deals  with  deportation. 

When  that  act  was  passed  the  provisions  mentioned 
were  sufficient  to  meet  the  particular  situation  with 
regard  to  the  places  to  which  aliens  could  be  deported ; 
but  it  is  apprehended  that,  from  this  time  forth,  there 
may  be  objection  on  the  part  of  some  of  the  countries 
that  have  been  at  war  with  the  Central  Powers  having 


256  Reconstructing  America 

aliens  who  are  citizens  or  subjects  of  the  latter  returned 
to  the  ports  of  the  former  in  connection  with  deportation 
proceedings.  Hence  it  is  thought  advisable  to  insert 
in  the  bill  this  section,  making  it  perfectly  clear  that  the 
Secretary  of  Labor  may  return  aliens  to  the  country 
of  their  nationality  or  nativity. 

Some  of  the  countries  will  even  encourage  that  class 
of  undesirables  to  emigrate. 

It  has  been  urged  against  this  legislation  that  there 
will  be  no  emigration  from  the  war-stricken  countries 
for  several  years  on  account  of  the  need  of  workers 
there.  If  that  be  true  this  bill  can  certainly  do  no 
harm.  But  is  it  true? 

AN  ITALIAN  OPINION 

Let  that  question  be  answered  as  to  one  country, 
at  least,  by  a  high  Italian  official.  A  few  weeks  ago 
a  delegation  from  the  Italian  labor  union  came  to  this 
country  from  Italy.  At  the  head  of  this  delegation 
was  Mr.  Alceste  De  Ambris,  a  member  of  the  Italian 
House  of  Deputies.  In  the  December  number  of 
"Italy  To-day,"  a  publication  gotten  out  in  New  York 
by  the  Italian  Bureau  of  Public  Information  in  the 
United  States,  Mr.  De  Ambris  is  quoted  as  follows : 

"Emigration  of  Italian  labor  after  the  war  will  be 
a  necessity,  and  part  of  the  function  of  the  delega- 
tion is  to  help  this  emigration.  Italy  has  an  excess  of 
300,000  births  over  deaths  annually,  and  these  300,000 
must  find  an  outlet.  Industry  in  Italy  has  advanced 
and  is  making  ever  increased  demands  on  labor,  but  the 
increase  is  not  equal  to  the  supply.  Italy  has  an  excess 
of  labor,  and  it  would  benefit  both  the  United  States 


Immigration  and  Women  in  Industry    257 

and  Italy  if  this  labor  could  be  induced  or  would  choose 
to  come  here. 

"Although  industry  in  Italy  is  entering  a  new  era  of 
aggrandizement,  this  development  cannot  yet  absorb 
Italy's  huge  labor  reserve.  Emigration  must  take  care 
of  that ;  those  who  remain  in  Italy  will  have  to  work  at 
good  wages,  and  Bolshevism  will  go  unheeded." 

Mr.  De  Ambris  was  solicitous  about  preventing 
Bolshevism  in  Italy,  but  he  was  not  worried  about  the 
Bolshevism  likely  to  be  produced  here  by  having  two 
men  for  every  job  here. 

What  is  said  about  the  surplus  of  labor  in  Italy  may 
be  said  with  equal  force,  and  even  greater  force,  as  to 
some  other  countries. 

Mr.  La  Guardia  in  his  testimony  before  the  committee 
predicted  a  large  immigration  of  Greeks,  Syrians,  and  so 
on.  And  Captain  Johnson,  member  of  Congress  from 
South  Dakota,  who  had  a  career  at  the  front  in  France 
and  had  the  opportunity  to  investigate  at  first  hand, 
predicted  before  the  committee  that  large  numbers 
of  the  worst  classes  will  as  soon  as  possible  make  a 
rush  for  America.  The  report  comments  thus : 

How  soon  will  that  be  ?  Just  as  soon  as  the  steamship 
companies  can  begin  their  transportation. 

MANY   ALIENS    GOING   HOME 

Again,  it  is  urged  that  many  aliens  now  here  will 
return  to  their  countries  as  soon  as  they  can  secure 
transportation.  That  is  no  doubt  true ;  but  nearly 
every  one  of  them  will  go  back  with  the  expectation  of 
soon  returning  to  this  country  and  bringing  some  of 
their  relatives  with  them. 


258  Reconstructing  America 

This  was  admitted  by  one  of  the  fairest  and  most 
intelligent  witnesses  that  appeared  before  our  committee 
against  this  bill.  There  were  two  cogent  reasons  which 
impelled  the  committee  to  favor  this  legislation.  One 
is  the  unsettled  labor  conditions  that  are  already  begin- 
ning here  and  that  will  no  doubt  grow  worse  as  the 
soldiers  from  our  armies  are  discharged  and  war  workers 
are  released. 

Although  less  than  one  fifth  of  our  soldiers  have  been 
discharged,  we  are  already  hearing  of  the  surplus  of 
labor  increasing  in  almost  every  section  of  the  country. 

A  few  weeks  ago  the  Division  of  Employment  Ser- 
vice of  the  Department  of  Labor  reported  a  surplus  in 
only  a  few  States.  Each  day's  report  adds  to  that  sur- 
plus, until  to-day  a  majority  of  the  States  report  such 
surplus. 

In  some  cities  riots  are  occurring  from  unemployment, 
and  in  a  few  cases  unemployed  discharged  soldiers 
are  engaging  in  those  riots. 

The  workingman  is  barely  making  a  support  at  present 
wages  with  the  high  cost  of  living  prevailing.  Then, 
how  can  he  be  expected  to  submit  to  a  reduction  of  wages 
while  the  cost  of  what  he  has  to  buy  to  feed  and  clothe 
his  family  is  so  high,  and  in  many  cases  going  higher? 

UNRESTRICTED   IMMIGRATION   A   TRAGEDY 

Then  will  it  not  be  a  tragedy  if  we  allow  thousands 
of  aliens  to  come  to  our  shores  to  work  for  low  wages 
and  thereby  secure  the  jobs  that  ought  to  go  to  the 
returning  American  soldiers  and  the  war  workers? 
The  American  Federation  of  Labor  and  the  four  brother- 
hoods of  railroad  workers  are  unanimously  for  this  bill. 


Immigration  and  Women  in  Industry    259 

The  writer  of  this  report  has  heard  from  some  large 
employers  of  labor  who  favor  this  legislation  because 
they  fear  the  confusion  and  irritation  that  will  result 
from  permitting  a  large  influx  of  foreigners,  many  of 
whom  bring  the  red  flag  in  one  hand  and  the  bomb  in 
the  other.  Another  reason  that  influenced  the  com- 
mittee is  the  danger  to  political,  moral,  and  material 
conditions  in  this  country  generally  by  the  admission 
of  thousands  of  revolutionists  and  Bolshevists. 

It  is  impossible  to  keep  out  revolutionists  and  Bol- 
shevists without  keeping  out  substantially  everybody. 

We  have  by  our  liberal  immigration  laws  taken  many 
who  have  proved  that  their  hearts  and  their  sympathies 
were  not  with  us,  and  they  were  ready  to  strike  their 
poison  fangs  into  the  bosom  that  warmed  them. 

Now  let  us  try  for  at  least  four  years  to  close  ranks 
and  try  to  see  "Who's  who,  in  America." 

Ill 

AFTER-WAR  STATUS  OF  WOMEN  WORKERS 

BY  Miss   MARY  VAN   KLEECK 
Director  of  the  Women  in  Industry  Service,  U.  S.  Department  of  Labor 

The  national  importance  of  women's  work  has  been 
clearly  and  officially  recognized.  They  have  demon- 
strated their  efficiency  in  numerous  instances.  The 
war  has  shown  that  for  both  men  and  women  effective 
service  depends  upon  a  high  standard  of  conditions  of 
labor.  And  the  new  spirit  has  received  expression  in  the 
government's  indorsement  of  collective  bargaining. 

But  reaction  has  set  in,  and  its  forces  seem  to  be 
affecting  at  once  the  status  of  women  workers.  Reso- 


260  Reconstructing  America 

lutions  have  been  passed  by  at  least  one  central  labor 
union  calling  on  the  women  who  have  entered  industry 
during  the  war  to  leave  their  jobs  now  that  the  war  is 
over.  A  trade-union  local  composed  entirely  of  men 
has  gone  on  strike  demanding  the  discharge  of  the 
women  employed  in  their  occupation,  and  have  received 
from  the  War  Labor  Board  a  favorable  verdict  on  their 
case.  Not  a  few  public  speakers  have  declared,  as  one 
expressed  it,  that  "The  women  have  responded  with 
fine  patriotism  to  the  appeal  to  take  part  in  industry 
during  the  war.  It  now  becomes  their  duty  to  with- 
draw. It  becomes  our  duty  to  persuade  them  to  with- 
draw." 

DANGER   OF  AROUSING   SEX  ANTAGONISM 

Fear  of  unemployment  and  fear  of  wage  competition 
are  back  of  the  demand  that  women  withdraw  from 
industry.  Couched  in  terms  of  giving  back  their  jobs 
to  returning  soldiers  the  demand  acquired  an  atmosphere 
of  the  war  spirit  and  a  patriotic  appeal  which  obscure 
its  real  import.  It  is  hardly  necessary  to  point  out 
that  the  reinstatement  of  the  returning  soldier  in  his 
former  position  if  he  wants  it  is  an  ethical  obligation 
which  holds  whether  his  place  has  been  taken  by  a  woman 
or  by  a  man,  and  even  a  complete  and  universal  recog- 
nition of  this  ethical  obligation  would  not  settle  the 
problem  which  it  is  assumed  to  illustrate.  The  whole 
situation  is  fraught  with  danger  in  its  possibilities  of 
forcing  the  women  to  join  together  as  a  group  to  defend 
their  right  to  employment  against  the  opposition  of  the 
men  in  an  industry.  The  Cleveland  Street  Railway 
Company  has  only  one  hundred  and  seventy  women 


Immigration  and  Women  in  Industry    261 

employed  as  conductors,  and  the  demand  on  the  part 
of  the  men's  trade-union  local  for  their  discharge  is 
only  one  instance,  but  it  is  a  danger  signal.  Carried 
further  such  a  problem  as  that  would  inject  into  the 
labor  movement  a  new  alignment  of  men  workers 
against  women  workers. 

The  antagonism  would  be  the  more  unfortunate 
because  it  has  its  roots  in  a  twofold  fear  common  to 
men  workers  and  women  workers,  —  the  fear  of  unem- 
ployment and  the  fear  of  a  cut  in  wage  rates.  That 
the  way  out  is  a  united  attack  upon  the  causes  of  these 
fears  rather  than  a  conflict  between  the  two  groups 
who  are  their  victims  would  seem  too  obvious  to  require 
proof.  Success  in  attacking  this  problem  depends, 
however,  upon  the  extension  to  women  of  the  right 
and  responsibility  for  participation  in  action  in  dealing 
with  labor  problems.  Without  this  recognition,  their 
own  economic  rights  may  become  a  two-edged  sword. 

NEED    OF    AGENCIES    OF    ADJUSTMENT 

The  new  spirit  of  the  times,  then,  with  all  the  dangers 
of  new  developments  accentuating  old  difficulties  for 
women  in  industry  demands  an  enlargement  of  the 
bounds  of  activity  and  a  comprehensive  program.  First 
there  is  needed  a  new  formulation  of  standards  already 
demonstrated  to  be  attainable  and  desirable;  and, 
second,  the  situation  demands  a  clarifying  view  of  the 
administrative  agencies  necessary  for  the  attainment 
of  standards,  including  agencies  of  government,  man- 
agement in  industry,  and  the  organization  of  workers. 

The  fear  of  unemployment  must  be  lessened  by  the 
further  growth  and  the  strengthening  of  the  national 


262  Reconstructing  America 

system  of  labor  exchanges,  efficient  enough  and  com- 
prehensive enough  to  reduce  unemployment  to  a  mini- 
mum and  to  afford  a  basis  for  analyzing  the  causes  of 
the  minimum  which  is  left  when  so  many  as  possible 
of  the  workers  have  been  placed  in  the  vacant  jobs. 

The  fear  of  a  cut  in  wages  must  be  met  by  a  wide 
extension  of  agencies  of  adjustment,  and  these  can  be 
successful  only  in  so  far  as  they  derive  their  strength 
from  real  collective  bargaining  extending  over  a  wide 
enough  area  of  industry  to  be  truly  representative  of 
the  collective  will  of  management  and  workers.  It  is 
the  absence  of  these  agencies  of  adjustment  which  makes 
the  present  situation  so  strained,  each  side  awaiting 
anxiously  for  the  first  test  of  strength  on  the  main- 
tenance of  wages  paid  during  the  war  or  their  reduction 
to  pre-war  rates  or  lower. 

Labor  legislation  must  meet  the  test  of  the  new  spirit 
while  it  busies  itself  with  specific  gains  very  necessary 
for  workers  in  industry.  The  fear  which  the  American 
labor  movement  frequently  expresses  of  political  action 
as  opposed  to  voluntary  economic  action  would  seem  to 
indicate  either  a  reluctance  on  the  part  of  labor  to  use 
its  own  political  powers,  or  a  lack  of  flexibility  or 
responsiveness  to  local  and  concrete  needs  on  the  part 
of  governmental  agencies  for  administration  of  labor 
laws.  It  is  not  difficult  to  prophesy  that  the  problem 
of  labor  legislation  just  ahead  is  not  the  formulation 
of  concrete  aims,  but  the  development  of  a  new  spirit 
and  method  in  administration.  Nor  is  administration 
of  labor  laws  a  distinct  and  separate  problem.  It  is 
rather  part  of  a  task  of  government  in  all  its  units, 
municipal,  county,  State,  and  national. 


Immigration  and  Women  in  Industry    263 

Two  aims  for  labor  legislation  for  women  workers 
may  be  emphasized  as  of  immediate  importance.  They 
are  the  enactment  into  law  of  the  eight-hour  day,  and  the 
fuller  representation  of  women  in  important  positions 
in  administration  of  labor  laws.  The  first  has  the 
sanction  of  experience,  but  an  examination  of  state 
labor  laws  shows  how  far  the  majority  of  States  fall 
below  such  a  standard.  The  second  will  create  out- 
posts of  observation  necessary  in  the  new  relations  of 
women  in  industry. 


CHAPTER  XIII 
BOLSHEVISM  —  WHAT  IT  IS 

VICE  PRESIDENT  THOMAS  RILEY  MARSHALL,  in  his  de- 
nunciation of  Bolshevism  and  anarchy,  propounded  what 
he  termed  a  new  " creed"  for  Americans,  as  follows  : 


,THE  UNITED  STATES  No  ANARCHIST  CAFE 

;  BY  VICE  PRESIDENT  MARSHALL 

I  believe  that  the  American  Republic  as  instituted 
by  the  fathers  constitutes  the  finest  system  of  govern- 
ment ever  ordained  among  men,  and  affords  the  ma- 
chinery for  the  righting  of  grievances  without  resort  to 
violence,  tumult  and  disorder. 

I  believe  that  every  inequality  which  exists  in  the 
social  and  economic  condition  of  the  American  people 
is  traceable  to  the  successful  demands  of  interested 
classes  for  class  legislation,  and  I  believe,  therefore, 
that  practical  equality  can  be  obtained  under  our  form 
of  government  by  remedial  legislation  in  the  interest  of 
the  American  people,  and  not  in  the  interest  of  any  body 
thereof,  large  or  small. 

I  believe  there  is  no  justification  in  a  government, 
where  officials  are  elected  and  laws  made  by  the  people, 
for  a  minority  to  threaten  bloodshed  and  anarchy  unless 
the  majority  shall  submit  to  the  will  of  the  minority. 

264 


Bolshevism --What  it  is  265 

I  believe  that  America  belongs  to  American  citizens, 
native  and  naturalized,  who  are  willing  to  seek  redress 
for  their  grievances  in  orderly  and  constitutional  ways, 
and  I  believe  that  all  others  should  be  taught,  peace- 
fully if  we  can,  and  forcibly  if  we  must,  that  our  country 
is  not  an  international  boarding  house  nor  an  anarchist 
cafe. 

I  pledge  myself  to  the  support  of  these  principles 
by  my  voice,  my  vote,  and,  if  need  be,  by  my  fortune 
and  my  life,  and  I  promise  my  country  to  train  my 
children  in  this  most  holy  faith. 

II 

THE  RED  FLAG  OF  BOLSHEVISM 

BY  SENATOR  JAMES   A.   REED 

Revolution  is  always  dangerous.  From  autocracy 
to  anarchy  —  such  is  the  swing  of  the  pendulum.  No 
race  ever  tamely  submitted  to  physical  slavery  unless 
it  had  also  been  placed  in  intellectual  bondage.  An 
oppressed  people  is  likely  to  regard  any  law  as  an  in- 
strument of  tyranny.  Accordingly,  they  arrive  at  the 
conclusion  that  all  law  must  be  destroyed  in  order  that 
liberty  may  be  attained.  It  follows  that  an  ignorant 
and  oppressed  people  in  the  first  stages  of  revolutionary 
fervor  usually  substitute  the  power  of  the  mob  for  the 
tyranny  of  the  autocrat ;  whereupon,  there  ensues  a 
period  of  bloody  terrorism  out  of  which  emerges  a 
new  despotism.  This  is  but  an  epitome  of  the  world's 
history. 

The  American  Colonists  rebelled  because  of  a  tax  in 
itself  inconsequential.  They  asserted  their  rights  as 


266  Reconstructing  America 

Englishmen.  They  refused  to  permit  any  impairment 
of  their  just  privileges.  Such  a  people,  believing  in 
constitutions,  appreciating  liberty,  knowing  that  free- 
dom is  the  blossom  and  fruit  of  the  law,  were  capable 
of  establishing  a  stable  government.  It  was  to  be  a 
government  of  law  created  by  a  free  people  for  their 
own  control.  To  this  law  they  gave  a  willing  obedience. 
They  recognized  the  fact  that  without  law  no  right  can 
be  secure,  and  that  where  rights  are  not  secure  there 
is  no  liberty. 

STARVATION   AND   ANARCHY   STALKING  ACROSS   EUROPE 

The  Fathers  of  the  Republic  occupied  a  position  of 
rare  advantage.  They  had  inherited  their  liberties. 
A  long  line  of  ancestors,  stubbornly  resisting  oppression, 
had  wrung  from  the  Kings  of  England  the  Magna 
Charta  and  established  the  principles  of  common  law. 
They  had,  therefore,  become  schooled  in  the  science  of 
government.  They  understood  the  fundamental  struc- 
ture of  a  free  state.  In  all  the  history  of  the  world  there 
never  was  gathered  in  one  assembly  a  body  of  men  so 
skilled  in  knowledge  of  history,  of  statecraft,  and  of 
government,  as  the  Continental  Congress.  Their  great- 
ness and  understanding  were  typical  of  those  they  repre- 
sented. 

These  observations  may  serve  some  purpose  in  con- 
sidering events  now  crowding  upon  the  world's  stage. 
The  carnage  of  war  has  scarce  ceased.  Through  the 
smoke  that  is  just  lifting  there  can  be  seen  two  sinister 
figures  —  starvation  and  anarchy  —  stalking  across  the 
battle  fields  of  Europe.  The  erstwhile  soldiers  of  autoc- 
racy now  march  beneath  the  red  flag.  Kings  are  being 


Bolshevism  —  What  it  is  267 

tumbled  from  their  thrones.  Mobs  riot  in  a  dozen 
capitals.  Anarchy  prevails. 

Some  of  these  conditions —  natural  concomitants  of 
war  —  are  not  surprising.  They  come  in  the  natural 
course  of  things,  and  under  ordinary  conditions  would 
give  way  to  some  form  of  organized  government  which 
might  or  might  not  bring  to  the  common  people  a  greater 
measure  of  liberty. 

The  astonishing,  the  sinister,  fact  exposed  by  the 
European  conflict  is  that  the  doctrines  of  anarchy  have 
taken  root  in  every  country  of  the  world.  For  years 
they  have  been  secretly  taught.  The  evil  seed  has 
fallen  upon  the  fruitful  soil  of  ignorance  and  criminality. 
The  extent  of  this  propaganda  and  its  marvelous  secrecy 
are  difficult  of  comprehension.  With  an  almost  diabolic 
skill  it  played  upon  the  prejudices,  hopes,  and  fears  of 
vast  numbers  of  people.  To  the  unlettered  Russian 
peasant,  whose  back  had  long  bled  beneath  the  lash,  it 
promised  freedom  from  the  blows  of  oppressors ;  free- 
dom from  all  the  restrictions  of  law.  It  held  before  his 
dazzled  vision  promise  of  wealth  without  labor. 

It  was  therefore  not  surprising  that  a  people  long 
oppressed  could,  by  rapid  processes,  be  led  to  the  over- 
throw of  their  rulers,  then  to  their  murder,  then  to  the 
betrayal  of  confederates  and  friends,  and  finally  to  a 
state  of  anarchy  in  which  the  cruelty  of  the  mob  has 
surpassed  the  tyranny  of  the  Romanoffs. 

ANARCHISTIC   DOCTRINES    THAT   THREATEN    AMERICA 
DEFINED 

It  further  appears  that  this  doctrine  has  its  adherents 
in  every  part  of  Germany  and  Austria ;  that  its  rami- 


268  Reconstructing  America 

fications  extend  into  all  European  countries ;  and  that 
there  is  even  in  our  own  land  an  astonishing  number  of 
men  who,  existing  under  the  guise  of  various  organiza- 
tions, accept  in  the  main  doctrines  that  are  entirely  or 
partially  anarchistic. 

The  I.  W.  W.'s  deny  the  force  of  all  law  and  have 
plotted  the  destruction  of  property  in  nearly  every 
Western  state.  This  organization  assumes  a  more 
serious  and  mischievous  aspect  when  we  consider  it  in 
connection  with  its  kindred  organizations  in  other 
countries. 

It  is  not  too  much  to  say  that  a  world  conspiracy, 
looking  to  the  overthrow  of  all  governments,  has  been 
in  process  of  formation  for  many  years.  To  disregard 
these  plain  facts  is  not  the  part  of  wisdom.  The  magni- 
tude of  the  movement  can  only  be  appreciated  when  we 
consider  that  many  organizations  and  societies  go  far 
enough  to  advocate  doctrines  which  tend  to  the  destruc- 
tion of  law,  yet  do  not  boldly  announce  that  as  their 
ultimate  end.  Indeed,  some  of  them  are  undoubtedly 
ignorant  of  the  inevitable  logic  of  their 'teachings.  It  may 
be  useful  to  review  a  few  of  these  dangerous  doctrines. 

It  is  asserted  by  some  that  the  title  to  all  property 
should  be  vested  in  the  state.  This  is  only  a  polite 
method  of  stating  that  the  property  of  citizens  should 
be  confiscated. 

It  is  claimed  by  others  that  the  citizen  should  perform 
such  duties  as  are  prescribed  by  state.  This  in  its  last 
analysis  makes  of  every  citizen  a  slave,  for  each  man  is 
thereby  obliged  to  do  that  which  he  is  ordered  to  do  by 
some  other  man. 

It  is  argued  by  those  of  a  milder  persuasion  that  the 


Bolshevism-- What  it  is  269 

government  should  control  and  regulate  all  important 
properties  in  the  land.  (I  do  not  here  speak  of  public 
utilities,  which  lie  in  a  class  by  themselves.)  But  this 
doctrine,  if  ever  established,  will  finally  lead  to  public 
control  and  ownership  of  all  property,  i.e.,  the  abolition 
of  all  property  rights. 

The  advocates  of  these  theories  apparently  do  not  un- 
derstand that  the  establishment  of  any  one  of  them  de- 
stroys the  very  thing  we  call  liberty,  for  liberty  consists 
in  the  right  to  life,  in  the  right  to  choose  one's  vocation, 
and  in  the  right  to  toil  and  to  keep  that  which  has  been 
produced.  In  a  word,  to  move  freely  about  the  world ; 
to  possess  and  enjoy  property. 

AMERICAN  DEMAGOGUES   WHO  ASSIST  BOLSHEVISM 

There  is  another  class  of  "assistant  Bolsheviki" 
which  deserves  special  attention.  I  refer  to  those 
numerous  and  noisy  agitators  who  for  years  have  gone 
about  undermining  the  respect  and  reverence  of  our 
people  for  law  and  for  the  institutions  of  government. 

At  the  very  head  of  this  list  I  class  those  who  in  recent 
years  have  indiscriminately  denounced  the  courts  of  our 
land.  Reference  is  not  here  made  to  men  who  have 
properly  pointed  out  abuses  by  individual  courts  or 
judges.  I  am  speaking  of  that  agitation  for  years  carried 
on  by  aspiring  demagogues,  which  among  other  heresies 
proposed  a  referendum  vote  upon  the  judgments  of 
courts.  That  is  to  say,  they  declared  that  for  the  law 
of  the  land,  construed  by  a  court,  should  be  substituted 
the  opinion  of  a  majority  unregulated  by  any  rule  and 
responding  only  to  the  impulse  of  the  hour.  The 
Bolsheviki  have  not  gone  further  than  to  suggest  that 


270  Reconstructing  America 

the  country  shall  be  ruled  by  the  opinion  of  the  mob, 
unguided  by  law  and  unchecked  by  constitution.  At 
this  point  they  touch  hands  with  certain  American  pub- 
licists and  politicians  of  great  repute. 

A  part  of  the  propaganda  referred  to  found  expres- 
sion in  denunciations  of  the  precedents  of  courts.  The 
advocates  of  this  "reform"  forget  that  the  rule  of  prece- 
dent is  only  the  rule  of  law,  and  that  if  precedents  be 
ignored  there  will  be  substituted  for  them  the  opinion 
of  the  individual  who  happens  at  the  moment  to  be 
acting  as  judge.  Thus  instead  of  a  government  of  law 
we  would  have  a  government  by  petty  tyrants  known  as 
judges,  who  would  rule  in  accordance  with  their  own 
will,  and  that  is  the  very  essence  of  despotism.  In  a 
word,  we  would  have  no  law.  The  advocates  of  the 
insidious  doctrine  I  am  discussing  are  but  a  step  re- 
moved from  the  Bolsheviki  of  Russia.  And  yet,  they 
found  so  many  followers  in  this  country  that  they  were 
able  to  write  their  principles  into  the  platform  of  a  great 
political  party. 

Recently  these  reformers  have  taken  up  the  advocacy 
of  another  doctrine  almost  equally  destructive.  They 
insist  that  no  court  should  ever  be  permitted  to  declare 
an  act  of  a  State  Legislature,  or  an  act  of  Congress, 
unconstitutional.  They  fail  to  comprehend  that  the 
establishment  of  such  a  doctrine  works  the  annihilation 
of  the  federal  and  of  all  state  constitutions.  This  re- 
sults because  if  a  State  Legislature,  or  the  Congress,  can 
pass  a  law  in  defiance  of  the  Constitution,  and  no  court 
is  permitted  to  declare  the  supremacy  of  the  Constitu- 
tion over  the  statute,  the  statute  becomes  the  law  of 
the  land.  Thus  the  Constitution  is  wiped  out. 


Bolshevism  —  What  it  is  271 


THE   ATTEMPT  TO  DESTROY   STATES     RIGHTS 

The  Constitution  of  the  United  States  might  there- 
fore be  abrogated  at  any  session  of  Congress,  by  the 
simple  process  of  passing  statutes  in  its  teeth.  Like- 
wise, the  Constitutions  of  the  respective  States  could  be 
similarly  repealed  or  abrogated  at  any  session  of  a  State 
Legislature. 

If  this  rule  were  to  be  adopted  any  State  Legislature 
could  pass  a  law  denying  the  right  to  trial  by  jury. 
Thereupon  a  citizen  might  be  haled  before  any  judge, 
denied  the  right  to  a  jury  of  his  peers,  and  sentenced  to 
execution.  An  appeal  to  the  Constitution  of  the  United 
States  would  be  answered  by  the  statement  that  "no 
court  is  possessed  of  the  right  to  declare  an  act  of  the 
Legislature,  or  the  proceeding  thereunder,  unconstitu- 
tional." 

This  vicious  doctrine,  utterly  destructive  of  the  Con- 
stitution, has  been  advocated  in  high  places.  Its  pro- 
tagonists manifestly  fail  to  see  that  they  propose  the 
destruction  of  the  Charter  of  the  people's  liberty. 
They  evidently  do  not  understand  that  when  the  people 
formed  the  Federal  Government,  and  the  governments 
of  the  respective  States,  they,  the  people,  reserved  to 
themselves  certain  rights  which  were  deemed  essential 
to  their  liberties,  and  that  they  declared  these  rights 
should  never  be  taken  away  without  their  express  con- 
sent, manifested  in  the  manner  and  form  provided  for 
in  the  charters  of  their  liberties.  They  fail  to  see  that 
the  proposition  to  make  legislative  and  congressional 
acts  superior  to  the  Constitution  places  it  in  the  power 
of  the  Legislature  and  the  Congress  to  destroy  all  the 


272  Reconstructing  America 

Constitutional  rights  thus  solemnly  reserved  by  the 
people  themselves.  Stated  differently  these  reformers 
close  their  eyes  to  the  fact  that  the  doctrine  they  propose 
strikes  at  the  basis  of  Constitutional  liberty;  that  it 
makes  legislative  bodies  supreme  and  empowers  them 
to  act  without  limitation  of  any  kind.  It  places  within 
a  legislative  majority  the  power  to  abolish  the  very  form 
of  our  government,  and  to  substitute  an  autocracy  for 
our  democracy. 

When  such  doctrines  as  these  are  preached  from 
exalted  places,  it  is  not  to  be  marveled  at  that  the  op- 
pressed of  other  lands  may,  in  blundering  through  the 
twilight  of  their  ignorance,  follow  the  lurid  glare  of  the 
red  flag,  or,  weltering  in  bloody  reprisals  and  revenges, 
imagine  they  enjoy  the  blessings  of  liberty. 

THE  CONSTITUTION  AND  THE  COURTS,  THE  PEOPLE'S 
SAFEGUARD    OF   LIBERTY 

At  this  tragic  period  of  the  world's  history  the  business 
of  all  friends  of  liberty  is  to  hold  fast  to  the  Constitution, 
to  uphold  the  dignity  of  our  courts,  and  to  teach  a  fact 
too  seldom  dwelt  upon  —  that  constitutions  are  the 
charters  of  the  people's  liberties,  to  which  they  should 
cling  as  did  the  ancient  refugee  to  the  horns  of  the  altar. 
We  should  remember  that  courts,  although  sometimes 
imperfect,  are  the  only  citadels  within  which  the  in- 
dividual can  find  a  refuge  from  private  wrong  or  official 
oppression. 

At  a  time  like  this  we  should  be  slow  in  changing  any 
of  the  old  principles  of  our  government,  however  im- 
perfect they  may  seem  to  some.  Let  it  not  be  forgotten 
that  they  have  withstood  the  storms  of  adversity  and 


Bolshevism  --  What  it  is  273 

vicissitudes  of  fortune  for  142  years.  Let  us  abide  in 
the  faith  that  those  rules  of  law  and  forms  of  govern- 
ment under  which  we  have  grown  to  be  the  most  puis- 
sant nation  on  earth  may  be  with  safety  tolerated  yet  a 
little  while  longer.  It  is  our  high  duty  just  now  to 
furnish  to  the  world  evidence  of  the  stability  of  our 
institutions.  Cannot  the  impatience  of  those  who  de- 
sire radical  experiment  abide  the  day  when  the  world 
shall  have  settled  back  into  a  condition  of  sanity,  when 
Europe's  reconstruction  may  have  been  accomplished, 
and  when  our  people  in  the  calm  after  light  of  contem- 
plation may  review  the  earth's  tragedy  and  by  its  lessons 
and  our  own  experience  judge  what  should  be  our  future 
course  ? 

Ill 

WHAT  is  BOLSHEVISM  IN  AMERICA? 

BY  LEWIS   ALLEN   BROWNE 

Bolshevism  in  America  is  an  excrescence  of  the  polit- 
ical melting  pot  —  the  social  refuse,  or  slag,  that  will 
not  fuse  —  the  impure  or  foreign  substance  in  our  popu- 
lation that  would  otherwise  Americanize. 

It  came  from  over  the  seas  with  other  of  our  national 
organic  ills  ;  it  is  making  a  supreme  effort  to  fasten  itself 
upon  our  body  politic,  and  is,  when  summed  up,  no 
more  or  less  than  a  vicious  enemy  within,  attacking 
our  democracy  by  acts  of  violence  and  irrational  propa- 
ganda. 

The  word  "Bolsheviki"  originated  in  Russia.  It 
means,  "They  who  want  the  most."  The  followers 
really  aimed  to  destroy  the  state  and  divide  the 


274  Reconstructing  America 

spoils.  As  an  American,  long  resident  in  Russia, 
expressed  it,  "The  Bolsheviki  are  the  'gun-men'  of 
Petrograd." 

Almost  instantly,  after  the  Russian  Bolsheviki  wrought 
chaos,  the  word  was  taken  up  over  here,  first  by  certain 
of  the  I.  W.  W.,  who  believed  that  in  it  they  had  character 
behind  which  they  could  hide  while  seeking  to  achieve 
what  seems  to  be  an  identical  aim  —  the  destruction  of 
government  and  the  division  of  the  spoils. 

So  far  as  the  most  careful  investigation  can  reveal 
there  are  no  organizations,  societies,  or  groups  included 
in  what  is  known  as  the  "American  Bolsheviki"  that 
stand  for  patriotism,  as  we  define  the  word.  American 
Bolshevism  is  the  "ism"  found  in  the  tenets  of  the  I. 
W.  W.,  People's  Council,  Anti-Conscription  League, 
League  of  Labor  and  Political  Prisoners,  anarchists, 
radical  Socialists,  German-hired  pacifists,  and  others  of 
the  league  of  irrational  objectors. 


IDENTICAL   WITH    THE   I.    W.    W.  S    IN   THE   WEST 

The  movement  is  stronger  in  the  West  than  in  the 
East.  The  West  is  having  more  trouble  with  it.  But 
Bolshevism  in  America,  being  so  closely  allied  to  the 
I.  W.  W.  that  if  you  prick  one  the  other  bleeds,  and  the 
I.  W.  W.  being  stronger  and  more  destructive  and  more 
troublesome  in  the  West,  this  is  only  natural. 

American  Bolshevism  should  not  be  mentioned  in  the 
same  breath  with  our  Organized  Labor.  Our  recognized 
organized  labor  leaders  will  have  nothing  to  do  with  it. 
From  Samuel  Gompers,  president  of  the  American 
Federation  of  Labor,  down,  they  denounce  it. 


Bolshevism  —  What  it  is  275 


PATTERNED    AFTER   THE    RUSSIAN   BOLSHEVISM 

The  Bolsheviki  in  Russia  demand  that  the  people 
should  immediately  take  possession  of  banks,  industries, 
and  other  great  aggregations  of  capital ;  that  they  divide 
the  capital  and  work  no  more.  Of  course,  the  crops 
would  grow  and  harvest  themselves,  the  mines  would 
pour  forth  refined  metals,  the  industries  would  turn  out 
finished  products  —  all  without  human  effort,  while 
Lenine  and  his  Bolsheviki  sat  back  in  ease  and  idleness, 
doing  nothing  except  spend  the  money  they  had  looted 
and  divided. 

Not  long  ago  I  heard  a  socialist  who  carried  an  I.  W.  W. 
membership  card,  addressing  a  group,  say:  "We  must 
strike  for  a  six-hour  laboring  day,  then  a  four-hour  day, 
then  a  two-hour  day,  with  increased  wages  all  the  time, 
and  then  we  will  be  strong  enough  to  take  everything 
and  work  no  more." 

That's  Bolshevism,  whether  it  is  located  in  Petrograd 
or  New  York,  Moscow  or  Chicago. 

One  sign  of  our  awakening  to  this  danger  came  from 
Chicago,  where  R.  Goodwin  Rhett,  President  of  the 
Chamber  of  Commerce  of  the  United  States,  warned 
the  business  men  against  this  danger,  saying : 

"American  Bolshevism  is  a  menace  to  us  equal  to 
German  militarism.  The  American  Bolsheviki  would 
turn  us  over  to  mob  tyranny  more  cruel  and  destructive 
than  ever  before  known." 


276  Reconstructing  America 

IV 
GROWING  MENACE  OF  THE  I.  W.  W. 

BY  LYNN  FORD 

The  I.  W.  W.  from  its  inception  has  been  a  lawless 
organization,  an  organization  that  is  a  law  unto  itself. 

"An  injury  to  one  is  an  injury  to  all"  is  the  I.  W.  W. 
motto.  In  the  record  of  the  organization  there  is  no 
evidence  that  any  member  was  ever  expelled  for  the 
commission  of  crime,  although  hundreds  have  been 
convicted  on  charges  varying  from  vagrancy  to  mur- 
der. Defense  funds  are  continually  being  raised  for 
the  support  of  members  charged  with  offenses  against 
the  criminal  statutes.  This  attitude  results  in  the  re- 
cruiting of  many  members  who  find  it  advantageous 
to  have  the  support  of  an  organization  that  does  not 
desert  them  when  they  come  in  conflict  with  the  law. 

Members  are  taught  to  regard  as  martyrs  all  of 
their  number  convicted  of  crime.  They  have  en- 
deavored to  canonize  members  who  have  been  executed 
for  murder  or  who  have  fallen  in  open  conflict  with 
the  authorities. 

While  the  I.  W.  W.  has  operated  from  time  to  time 
in  the  East,  as  at  Lawrence  and  Paterson  during  the 
strikes  of  the  textile  workers,  it  is  west  of  the  Mississippi 
that  it  is  best  known.  British  Columbia  and  Mexico 
have  also  offered  a  fertile  field. 

One  of  the  largest  and  most  influential  branches  of  the 
I.  W.  W.  has  been  the  Agricultural  Workers  Indus- 
trial Union.  Its  membership  is  enrolled  from  migratory 
laborers  in  the  harvest  fields  of  the  West.  The  character 


Bolshevism-- What  it  is  277 

of  the  recruits  in  this  division  is  typical  of  that  in  other 
branches. 

Palliative  measures  will  not  be  effective  in  disposing 
of  I.  W.  W.-ism.  The  root  lies  too  deep.  Social  "rem- 
edies" for  the  unrest  which  makes  men  prey  to  radical 
agitation  may  be  reserved  for  discussion  by  those  who 
deal  in  cure-alls.  Certain  it  is  that  if  the  drifting  laborer 
is  to  be  estranged  from  these  radical  teachings  we  must 
secure  some  more  comprehensive  and  rational  handling 
of  the  migratory  labor  problem.  To  permit  this  to  go 
on  in  the  haphazard  fashion  which  has  characterized 
it  in  the  past  is  to  insure  the  future  of  the  I.  W.  W. 

BOLSHEVISM  AND  I.  W.  W.-ISM   IDENTICAL 

The  continuation  of  I.  W.  W.-ism  among  the  foreign 
population  of  the  United  States  has  become  in  the 
light  of  recent  events  a  subject  of  international  aspect. 
Officers  of  the  I.  W.  W.  and  foreign  correspondents  have 
stated  that  former  members  of  the  organization  are 
high  in  the  councils  of  the  present  Russian  regime. 

Let  there  be  no  misunderstanding  of  the  fact  that  the 
worst  of  Bolshevism  and  I.  W.  W.-ism  are  identical.  It 
will  be  largely  to  the  foreigner  speaking  an  alien  tongue 
that  the  appeal  will  be  made.  We  have  been  remiss  in 
devising  effective  means  and  urging  the  education  of 
the  aliens  among  us.  The  need  has  been  made  plain 
in  many  ways  but  in  none  having  a  more  vital  bearing 
upon  our  security  than  the  readiness  with  which  this 
element  of  our  population  embraces  the  teaching  of  the 
I.  W.  W. 


278  Reconstructing  America 


BOLSHEVISM  "AUTOCRACY'S  TWIN  BROTHER" 

BY  CHARLES   EDWARD  RUSSELL 

Ik* 

Bolshevism  is  not  a  disease  of  the  brain  that  is 
confined  to  the  latitude  of  Russia,  but  a  product  of 
certain  conditions.  Bolshevism  is  a  protest  against 
what  men  consider  a  great,  organized,  and  intolerable 
wrong.  .  .  . 

The  Bolshevist  movement  in  Europe  and  the  I.  W.  W. 
in  the  United  States  are  only  outbursts  from  the 
same  fundamental  feeling  of  injustice  that  elsewhere  has 
driven  men  to  form  labor  organizations  for  their  de- 
fense, and  again  to  launch  great  cooperative  move- 
ments. Some  of  these  manifestations  are  good  for 
society  and  some  are  bad,  but  whether  good  or  bad  they 
all  come  from  the  same  general  source  — •  the  unfair- 
ness of  the  present  system  by  which  a  few  men  get  a 
great  deal  of  the  wealth  labor  creates  and  the  masses 
of  men  get  little. 

Bolshevism  is  the  most  violent  phase  of  this  protest, 
and  the  most  dangerous.  .  .  . 

DOOMED   TO   EXTINCTION 

The  trouble  about  Bolshevism  is,  first,  that  it  does  not 
work  ;  it  is  not  a  workable  scheme  of  government  com- 
petent to  meet  the  needs  of  mankind;  and  second,  it 
provides  no  mandate  for  government  except  the  will  of 
one  class  of  the  community,  to  the  exclusion  of  all  others. 
It  has,  therefore,  no  basis  in  democracy,  is  open  to  all 
of  the  fatal  flaws  of  the  autocracy  of  which  it  is  the  twin 


Bolshevism -- What  it  is  279 

brother,  and  is  just  as  much  doomed  to  eventual  extinc- 
tion as  was  the  Czar's  autocracy  which  it  supplanted. 

There  seems  to  be  a  certain  order  of  mind  to  which 
Bolshevism  is  naturally  attractive,  but  the  gentlemen 
who  talk  glibly  about  it  would  be  very  much  distressed  if 
they  were  compelled  to  live  in  a  Bolshevist  state. 

VI 

THE  DISEASE  OF  BOLSHEVISM 

BY  THE  MARQUIS  OKUMA 

Japanese  Premier 

The  disease  of  Bolshevism  is  a  product  of  special 
environment  and  special  circumstances.  Bolshevism  in 
Russia  was  caused  by  the  excesses  of  the  former  Russian 
government.  Bolshevism  seems  to  contain  a  part  of 
the  doctrines  of  Karl  Marx.  Now  consider  how  Marxism 
is  operating  even  in  Germany,  the  home  of  Marx.  The 
social  democrats  there  modified  Marxism  to  a  great 
extent.  When  we  examine  the  program  of  the  social 
democrats,  we  find  that  it  is  nothing  else  than  simple 
democracy,  without  extremism.  Circumstances  alter 
and  modify  theories,  and  actualities  mitigate  doctrines, 
even  in  Germany.  All  these  extreme  theories  in  the 
United  States  and  in  England  and  France  are  greatly 
modified.  But  in  Russia  the  former  government  was 
bad  beyond  belief.  Thus  extreme  reaction  gave  birth 
to  extreme  Bolshevism.  .  .  . 

NO    FIELD    FOR    EXTREMISTS    IN    JAPAN 

It  is  possible  that  new  forces  may  find  a  response 
among  various  nations,  but  these  theories  will  be  modified 


280  Reconstructing  America 

under  healthy  conditions  —  in  England  or  the  United 
States,  for  instance  —  for  Bolshevism  cannot  thrive  in 
these  countries,  for  the  very  simple  reason  that  there  are 
no  grounds  to  justify  such  extreme  ideas.  It  is  true  that 
the  distribution  of  wealth  is  not  perfect  anywhere  and 
a  period  of  reconstruction  must  come,  but  it  will  not  be 
accompanied  by  extremism. 

We  have  no  reason  to  fear  the  spread  of  this  disease 
in  Japan.  Moderate  socialism  may  meet  with  some  suc- 
cess here,  but  there  is  no  room  for  extremism  in  Japan. 
After  the  war  there  will  be  a  tendency  in  every  country 
for  more  democracy  and  for  a  more  just  distribution  of 
wealth,  but  Japan  has  little  to  fear  in  Bolshevism,  for, 
though  our  country  is  a  monarchy,  the  fundamental 
principle  of  our  government  is  democracy.  It  has  been 
so  for  many  years.  Our  government  is  concerned  with 
the  general  welfare  of  the  people.  Ours  is  indeed  a 
government  for  the  people.  We  have  a  real  democracy 
without  using  the  term  democracy.  It  is  the  very 
keynote  of  our  government.  Therefore  there  is  no 
place  in  Japan  for  such  extremism  as  wrecked  Russia. 


CHAPTER  XIV 
OUR  MERCHANT  MARINE 

I 

THE  NEW  SHIPPING  ERA  —  OIL  THE  COMING  FUEL 

BY  HON.  EDWARD   N.   HURLEY 

Chairman  United  Slates  Shipping  Board 

THERE  is  much  uncertainty  as  to  how  theoretical 
solutions  of  certain  problems  will  work  out  after  the 
war.  But  there  is  no  uncertainty  as  to  the  shipbuild- 
ing industry.  It  is  going  to  be  a  permanent  institu- 
tion. The  United  States,  Great  Britain,  and  other 
nations  will  have  all  they  can  do  for  years  to  provide  the 
necessary  world  ship  tonnage.  Some  industries  that 
came  in  with  the  war  will  go  out  with  the  war.  But 
not  so  the  shipbuilding  industry.  It  is  here,  and  is 
here  not  only  to  stay  but  to  grow. 

All  the  probabilities  point  to  the  conclusion  that 
within  five  years  we  shall  have  a  force  of  one  million  men 
in  connection  with  the  American  merchant  marine. 
This  force  will  include  shipyards  workers,  men  and  women 
in  factories  making  ship  equipment,  officers  and  seamen 
manning  our  fleets,  and  numerous  groups  engaged  in 
export  trade. 

Our  export  trade  has  already  grown  by  great  bounds. 
In  the  four  fiscal  years  preceding  the  wrar  the  total  foreign 
trade  of  the  United  States  was  815,972,000,000.  In 
the  four  fiscal  years  since  the  war  it  has  increased  to 

281 


282  Reconstructing  America 


>, 23 2, 000,000.  Our  imports  for  those  two  periods 
have  increased  from  $6,887,000,000  to  $9,558,000,000. 
Our  exports  during  the  same  time  have  increased  from 
$9,084,000,000  to  $19,674,000,000,  and  this  notwith- 
standing the  fact  that  our  exports  of  cotton  decreased 
about  33  per  cent  because  of  Germany,  Austria, and  some 
other  countries  being  shut  out  of  the  market.  True, 
in  stating  these  great  totals,  mention  must  be  made  of 
the  fact  that  on  the  average  money  values  have  risen 
50  per  cent,  but  even  with  this  allowance,  our  exports 
have  greatly  increased,  not  only  to  Europe,  but  to  all 
other  continents  as  well. 

The  United  States  spent  immense  sums  building  the 
Panama  Canal.  These  sums  have  totaled  $375,000,000 
including  $50,000,000  paid  to  the  New  French  Canal 
Company  and  to  the  Panama  Republic.  Yet  when  the 
Canal  was  built  and  opened  the  merchant  marine  was  at 
such  a  low  ebb  that  the  amount  of  our  sea-borne  imports 
and  exports  carried  in  American  vessels  was  trifling. 
But  now  with  the  great  American  merchant  fleets 
already  created  and  the  still  greater  fleets  in  process  of 
creation  by  the  United  States  Shipping  Board  the 
Panama  Canal  has  become  a  waterway  of  prime  impor- 
tance to  the  American  merchant  marine  and  an  under- 
taking and  investment  of  increasing  benefit  to  the 
American  people. 

In  1914,  the  seagoing  American  merchant  marine 
comprised  only  391  vessels  of  1500  dead-weight  tons  and 
over,  totaling  1,660,679  dead-weight  tons.  To-day  our 
seagoing  fleet  of  1500  dead -weight  tons  and  over  totals 
1389  vessels  of  7,043,210  dead-weight  tons.  All  told, 
within  the  jurisdiction  of  the  Shipping  Board,  includ- 


Our  Merchant  Marine  283 

ing  requisitioned  and  chartered  ships,  there  are  now 
(November  1918)  2312  seagoing  vessels  totaling 
10,114,334  dead-weight  tons.  Since  August,  191 7,  nearly 
4,000,000  dead-weight  tons — to  be  exact,  3,912,836 
dead-weight  tons  —  of  new  shipping  have  been  launched, 
and  2,894,510  dead-weight  tons  have  been  completed 
and  delivered  for  service.  Nearly  nine  times  as  much 
seagoing  tonnage  was  built  in  the  United  States,  in  1918, 
as  in  the  banner  pre-war  year  of  American  shipbuilding. 

SCARCITY   OF   SHIPPING  —  HIGH   PRICES 

This  is  only  the  beginning  of  a  program  calling  for 
25,000,000  dead-weight  tons.  The  major  part  of  the 
billions  we  have  appropriated  were  for  needs  that  will 
not  outlive  the  war.  But  the  expenditures  authorized 
for  the  United  States  Shipping  Board  represent  an  out- 
lay that  will  be  important  after  the  war.  It  includes 
construction,  plants,  housing,  transportation,  recruit- 
ing, and  operation.  Every  dollar  of  this  is  a  sound  invest- 
ment for  America.  It  will  also  provide  a  great  merchant 
fleet  that  will  repay  its  cost  to  the  taxpayers  by  greatly 
helping  in  the  near  future  in  reducing  the  cost  of  com- 
modities to  the  consumer.  To  a  very  large  extent  the 
cost  of  great  numbers  of  products  has  gone  up  because 
of  the  scarcity  of  world  shipping  tonnage.  In  nearly 
all  of  the  important  articles  imported,  prices  have 
greatly  increased. 

The  average  price  of  clothing  wool  in  1918  has  been 
54  cents  per  pound  as  against  23  cents  per  pound  in 

Raw  sugar  averaged  4.8  cents  per  pound  in  1918  as 
against  2  cents  per  pound  in  1914. 


284  Reconstructing  America 

Raw  silk  averaged  $5.25  per  pound  in  1918  as  against 
$3.09  per  pound  in  1915. 

Mackerel  averaged  20.72  cents  per  pound  in  1918  as 
against  10.98  cents  per  pound  in  1914. 

Cheese  averaged  41.6  cents  per  pound  in  1918  as 
against  17.3  cents  in  1914. 

Manilla  hemp  in  1918  averaged  $353  per  ton  as  against 
$180  per  ton  in  1915. 

Flax  averaged  $1037.71  in  1918  as  against  $290.37 
in  1914. 

These  are  a  few  examples  of  what  to  a  considerable 
measure  lack  of  shipping  has  brought  about.  The 
program  of  United  States  Shipping  Board  will  do  much 
in  assisting  toward  relieving  this  condition  and  in  bring- 
ing relief  to  the  consumer.  Large  sections  of  our  people 
are  producers  as  well  as  consumers.  Our  fleets  of  ships 
will  take  away  the  products  they  raise  as  well  as  bring 
here  the  essential  things  we  have  to  import  from  all  parts 
of  the  world. 

A   REVOLUTIONARY   ADVANCE   IN   MERCHANT   SHIPS  * 

To-day  we  are  about  to  see  another  revolutionary 
advance  in  merchant  ships,  and  the  United  States 
will  again  have  some  advantage  —  if  we  back  natural 
resources  with  national  ingenuity. 

Petroleum  is  the  coming  factor  in  shipping.  It 
will  be  used  under  boilers  to  raise  steam.  Belter  yet, 
it  will  propel  internal-combustion  engines  of  the  Diesel 
type  —  the  motor  ship.  We  have  an  advantage  in  our 
large  output  of  petroleum  —  sixty-five  per  cent  of  the 
world's  output.  And  we  are  handiest  to  Mexico's  sup- 

*  Courtefy  of  The  Saturday  Evening  Post. 


Our  Merchant  Marine  285 

plies,  now  nearly  eight  per  cent  of  the  world  production, 
with  remarkable  possibilities  for  increase,  and  two  types 
of  crude  oil  that  are  peculiarly  suited  to  marine  use. 

In  making  a  learned  academic  forecast  of  America's 
new  merchant  marine  a  German  professor  recently  said , 
"In  trading  with  other  maritime  powers  it  is  right  and 
proper  that  a  nation  should  carry  in  its  own  ships  at 
least  fifty  per  cent  of  its  world  commerce." 

With  petroleum,  the  motor  ship,  and  American  inven- 
tive genius  and  energy,  we  have  reasonable  prospects 
of  again  carrying  our  own  exports  and  imports  on  this 
Germanic  basis  of  fifty-fifty;  but  we  must  not  rely 
upon  natural  advantages.  Coal  Oil  Johnny  will  not 
do  the  work  alone ;  we  must  put  brains  into  the  job. 

Petroleum  is  about  to  effect  a  transformation  in  world 
shipping  much  more  remarkable  than  that  which  was 
wrought  by  steam.  The  possibilities  are  fascinating. 
Both  the  oil-burning  and  the  motor  ship  remove  handi- 
caps under  which  the  merchant  navies  of  the  world  have 
been  steadily  degenerating.  They  reduce  operating 
costs,  increase  range  and  flexibility,  overcome  certain 
international  political  handicaps  in  shipping,  and  im- 
prove the  living  standards  and  morale  of  those  who  go 
down  to  the  sea  in  ships. 

Land  transportation  in  practically  all  countries  has 
been  developed  to  a  point  where  competition  is  regarded 
as  wasteful.  Competition  probably  played  a  useful  part 
in  days  when  railroads  were  being  built ;  but,  once  laid 
down,  it  was  agreed  that  competition  in  railroad  opera- 
tion, with  its  losses  and  bankruptcies,  worked  public 
damage. 

On  the  ocean,  however,  the  nations  have  let  competi- 


£86  Reconstructing  America 

tion  run  pretty  much  unchecked.  They  have  done 
little  to  overcome  by  teamwork  the  violent  fluctuations 
in  ocean  tonnage,  rates,  and  profits.  They  have  fought 
each  other  on  a  rate  basis  with  very  little  fundamental 
knowledge  of  shipping  costs.  And  the  general  result 
has  been  to  make  shipping  a  risky  business  for  the  in- 
vestor and  a  thankless  job  for  the  seaman,  and  to  run 
the  world  into  a  great  crisis,  with  a  shipping  plant  that 
proved  inadequate  and  antiquated. 

A    NEW   ERA   IN    SHIPPING 

But  the  world  has  undoubtedly  learned  its  lesson 
during  the  past  four  years.  Peace  will  find  it  building 
bigger  merchant  fleets  on  modern  lines.  Petroleum 
will  give  new  mechanical  advantages  and  help  to  bring 
order  into  ocean  transportation.  If  international  wisdom 
can  be  applied  to  operation  and  wasteful  competition 
eliminated,  shipping  may  enter  a  new  renaissance. 

When  Coal  Oil  Johnny  steps  aboard  a  merchant  ship 
and  takes  charge  of  the  engine  room,  the  transformation 
is  great.  The  comparatively  few  shipping  managers 
who  have  operated  with  petroleum  will  tell  you  that  it 
is  like  switching  from  the  One-Hoss  Shay  to  a  high- 
powered  racing  car. 

Take  the  advantages  found  in  the  oil-burning  ship 
with  steam  engines  over  the  coal  burner.  There  is  a 
reduction  in  the  number  of  men  needed  in  the  boiler 
room,  first  of  all. 

Some  months  before  the  Lusitania  sailed  on  her  last 
tragic  voyage  American  petroleum  experts  examined 
her  boilers  and  coal  bunkers  to  make  suggestions  for 
converting  her  into  an  oil  burner.  They  found  this 


Our  Merchant  Marine  £87 

entirely  feasible,  and  estimated  that  her  fireroom  force 
could  be  reduced  ninety  per  cent  by  the  change  —  that 
is,  one  man  out  of  ten  would  be  needed. 

ADVANTAGES   OF   OIL 

Next  comes  reduction  in  bunker  space,  with  an  in- 
crease in  cargo  space.  A  ton  of  oil  takes  five  cubic 
feet  less  space  than  a  ton  of  coal,  and  gives  eighty  per 
cent  steaming  efficiency  against  sixty-five  per  cent  for 
coal.  This  works  out  to  about  forty  per  cent  saving 
in  bunker  space,  which  is  made  available  for  cargo  in  a 
freighter.  Moreover,  there  is  a  saving  in  quarters  for 
the  crew,  because  an  oil-burning  ship  carries  fewer  men. 
Estimates  for  the  Mauretania  give  a  fireroom  force  of 
twenty-seven  men  for  oil  burning  as  against  three 
hundred  and  twelve  needed  to  burn  coal. 

Oil-burning  vessels  will  make  from  ten  to  twenty  per 
cent  more  mileage  than  coal  burners.  There  is  better 
control  of  steaming,  because  fires  can  be  started  and 
stopped  instantly,  steam  raised  quickly,  and  time  in 
port  saved  through  the  greater  ease  of  taking  on  oil 
as  contrasted  with  coal.  Coaling  is  always  a  dirty  job 
and  tedious,  whereas  oil  is  simply  pumped  into  the  double 
bottoms  quickly  and  without  fuss  or  muss. 

There  are  other  advantages  :  Oil  is  often  cheaper  than 
coal  in  actual  dollars  —  prices  vary  widely,  of  course. 
Oil  does  not  deteriorate  in  storage  like  coal.  Oil  elim- 
inates the  fire  risk  from  spontaneous  combustion  in 
coal,  and  is  not  subject  to  the  danger  of  shifting  in  rough 
weather  at  sea.  Oil  eliminates  ashes  and  ash  conveyors, 
smoke  and  soot,  and  the  necessity  for  frequently  paint- 
ing a  ship.  Oil  reduces  the  expense  of  grate  repairs, 


288  Reconstructing  America 

corrosion  of  boiler  plates,  fuel  handling  devices  afloat 
and  ashore. , 

Even  more  remarkable,  however,  is  the  increase  in 
radius  of  ship  operation  and  the  possibility  for  planning 
profitable  voyages  without  handicaps  imposed  by  coal- 
ing. The  coal-burning  ship  must  stop  frequently  for 
fuel.  Her  nationality  may  put  her  at  a  disadvantage 
where  foreign  bunkering  stations  are  used.  At  the  best, 
coal-bunkering  stations  in  other  countries  have  always 
involved  political  complications.  Even  with  the  mag- 
nificent bunkering  facilities  afforded  British  ships, 
there  are  various  parts  of  the  world  where  the  coal 
burner  must  steam  a  considerable  distance,  with  little 
or  no  cargo,  simply  to  take  on  coal  —  a  well-recognized 
operating  handicap. 

But  the  oil  burner  has  a  radius  of  from  two  to  three 
times  that  of  the  coal  burner.  Fast  passenger  liners 
burning  oil  for  steam  could  almost  make  the  round  trip 
from  New  York  to  Europe  and  back,  taking  most  of 
their  oil  on  this  side ;  and  with  freight  steamers  run- 
ning at  slower  speeds,  and  burning  less  oil  to  the 
mile,  it  would  be  possible  for  them  to  go  half  round 
the  world. 

Coal  Oil  Johnny  can  give  almost  any  coal-burning 
steamer  seven-league  sea  boots  by  a  few  simple  changes 
in  equipment  —  the  installation  of  oil  burners  under 
the  boilers  and  the  conversion  of  coal  bunkers  or  double 
bottoms  into  oil  tanks. 

But  even  that  is  only  half  his  potential  efficiency. 
Look  a  little  farther  ahead  and  design  your  ships  to 
run  with  internal  combustion  engines  of  the  Diesel  type, 
and  he  can  double  the  efficiency. 


Our  Merchant  Marine  289 

The  motor  ship  will  operate  on  about  half  as  much 
oil  as  the  oil-burning  steamer.  Its  engine-room  force 
is  reduced  still  more  —  from  one  to  three  men  are 
sufficient;  and  there  are  no  stokers,  for  the  motor 
ship's  mechanical  staff  is  made  up  of  skilled  men.  A 
Danish  motor  liner,  the  Fionia,  recently  went  clear 
round  the  globe,  making  a  voyage  of  thirty-two  thousand 
miles,  with  only  one  engineer. 

The  largest  motor  ship  yet  built,  the  Glenapp,  re- 
cently made  her  trial  trip  in  Scotland.  She  is  ten 
thousand  tons  dead  weight,  with  two  sets  of  Diesel 
engines,  sixty-six  hundred  horse  power.  It  is  estimated 
she  can  make  from  twelve  to  fourteen  knots  an  hour 
and  run  from  London  to  Australia  and  back  more  than 
halfway  without  replenishing  fuel  —  that  is,  going  by 
way  of  the  Suez  Canal,  she  could  take  oil  in  the  Persian 
Gulf  and  run  back  there  without  replenishing ;  while 
by  the  Panama  route  she  would  take  oil  in  the  Mexican 
Gulf. 

This  means  that,  with  the  world's  merchant  fleets 
equipped  entirely  as  motor  ships,  from  eighty  to  ninety 
per  cent  of  the  bunkering  stations  round  the  globe  could 
be  abolished  ;  ships  would  require  fuel  only  about  twice 
in  going  round  the  world  —  or  at  an  average  of  every 
six  weeks.  There  need  be  no  isolated  fuel  stations  ;  oil 
would  be  taken  on  only  where  ships  called  for  cargo 
or  passengers. 

ECOXOMY   AXD   CLEANTLrNTESS 

Any  one  who  has  made  a  voyage  through  the  tropics 
will  find  it  interesting  to  contrast  this  sort  of  ship  with 
his  recollections  of  coaling  incidents.  If  his  voyage  was 


290  Reconstructing  America 

through  the  Suez  Canal  to  Australia  or  India,  for  instance, 
he  remembers  the  terrific  heat  and  how  only  Chinese 
coolies  can  stand  the  temperature  of  the  fire  hold ;  and 
how  the  ship  was  coaled  at  Port  Said  by  hundreds  of 
women  carrying  baskets  of  fuel.  Neither  the  motor 
ship  nor  the  oil-burning  steamer  requires  coaling.  The 
engine  room  of  a  motor  ship  need  be  little  warmer  than 
the  deck  in  the  tropics ;  and,  besides,  there  is  probably 
only  one  man  attending  the  engines,  and  he  is  not  per- 
forming hard  manual  labor  nor  is  he  in  dirty  surround- 
ings. 

The  boiler  room  of  an  oil-burning  steamer  can  be 
twenty-five  degrees  cooler  than  if  coal  were  burned 
under  the  same  boilers.  For  most  of  the  heat  in  a  fire 
hold  comes  from  opening  the  furnace  doors  to  throw  in 
coal.  There  are  no  furnace  doors  when  oil  is  burned. 
With  coal,  heat  escapes  every  time  the  furnace  door  is 
opened  and  is  lost  for  steam-making  purposes.  With 
oil,  there  is  no  furnace  door  to  open  and  all  the  heat  is 
used  for  steam  making. 

Two  tramp  steamers  of  the  same  tonnage  leave  New 
York  for  Santos,  Brazil,  calling  at  other  ports  on  the 
way.  One  of  them  burns  coal  and  the  other  is  an  oil- 
burning  steamer.  The  coal  burner  makes  the  voyage 
in  twenty-four  days  and  eight  hours,  while  the  oil 
burner  makes  it  in  twenty-one  days  and  thirteen  hours 
—  a  saving  of  nearly  three  days,  due  to  the  fact  that  she 
runs  one  knot  more  an  hour  than  the  coal  burner,  owing 
to  steadier  steam  pressure  and  greater  speed  secured 
with  oil  fuel.  The  coal  burner  needs  twenty-seven  tons 
of  coal  daily,  or  657  tons  for  the  voyage.  The  oil 
burner  needs  16.7  tons  of  fuel  daily,  or  359  tons  for  the 


Our  Merchant  Marine  291 

voyage.     A  coal  burner  carries  nine  firemen  and  trim- 
mers ;   the  oil  burner  only  three. 

In  normal  times  oil  fuel  for  such  a  voyage  might  be 
either  a  little  cheaper  or  a  little  dearer  than  coal.  Sup- 
pose coal  and  oil  cost  the  same.  There  will  be  a  saving 
of  three  hundred  dollars  in  firemen's  wages  for  the  oil 
burner  and  seven  hundred  dead-weight  tons  of  bunker 
space  for  carrying  cargo ;  which  figures,  at  five  dollars 
a  ton,  earn  $3500  on  the  voyage.  So  the  oil  burner 
yields  $3800  more  to  her  owners  and  a  saving  of  three 
days  in  time.  On  a  year's  operation  the  oil  burner 
would  probably  make  at  least  two  voyages  more  than 
the  coal  burner,  and  these  would  be  clear  profit,  ex- 
cept for  fuel  cost  and  port  charges. 

Two  ships  of  the  same  tonnage  went  round  the  world, 
leaving  Europe,  rounding  Cape  Horn,  touching  at  San 
Francisco,  thence  crossing  the  Pacific  and  going  through 
the  Suez  Canal.  One  was  a  coal-burning  steamer  and 
the  other  a  motor  ship.  The  steamer  stopped  for  coal 
fourteen  times  and  burnt  8500  tons  on  the  voyage. 
The  motor  ship  burned  1446  tons  of  oil  and  had  capacity 
for  carrying  1250  tons;  so  she  might  have  gone  nearly 
the  whole  voyage,  starting  with  full  tanks  —  actually 
she  left  Europe  with  820  tons,  and  bunkered  twice  — 
in  San  Francisco  and  the  Persian  Gulf  — •  but  turned  an 
honest  penny  by  using  some  of  the  tank  capacity  to 
carry  an  oil  cargo  from  one  port  to  another. 

The  steamer  made  the  voyage  in  300  days  ;  the  motor 
ship  in  236  clays.  The  steamer  carried  7500  tons  of 
cargo ;  the  motor  ship  8500  tons.  The  cost  of  coal  — • 
normal  times  —  was  $41,275,  and  the  cost  of  oil  for  the 
motor  ship  was  $12,940  —  a  saving  of  nearly  seventy 


292  Reconstructing  America 

per  cent.  The  coal  burner  carried  fourteen  stokers; 
the  motor  ship  none.  The  motor  ship  carried  an  en- 
gine-room force  of  thirteen  men  as  against  nineteen 
for  the  coal  burner.  So  there  was  a  saving  in  fuel 
amounting  to  seventy  per  cent,  a  saving  in  time  of  more 
than  twenty  per  cent,  and  an  increase  in  cargo  of  nearly 
fifteen  per  cent. 

These  figures  become  most  significant  when  reduced 
to  terms  of  early  operating  costs.  Suppose  each  ship 
cost  one  million  dollars.  The  motor  ship  saved  $28,335 
on  fuel  alone  in  eight  months.  That  amounts  to  about 
four  per  cent  annual  interest  on  the  entire  investment 
in  the  ship. 

And  this  is  only  a  comparison  of  dollars  on  a  coal- 
burning  ship  and  a  mo  tor  ship  running  on  an  old-fashioned 
coal  burner's  schedule.  The  coal  burner  spent  183  days 
at  sea  and  117  days  in  port.  The  motor  ship  spent  140 
days  at  sea  and  96  days  in  port.  Because  the  world's 
cargo  business  is  still  organized  on  wasteful  lines,  with 
slow  turn-round  in  port,  the  motor  ship  dawdled  away 
more  than  three  months  in  port ;  whereas,  with  cargo 
facilities  organized  on  a  motor-ship  basis,  her  greater 
radius  and  flexibility  in  operation  would  have  made  it 
possible  to  save  much  of  this  time.  If  the  maritime 
world  can  tackle  this  one  item  of  waste  after  the  war,  it 
may  go  far  toward  paying  off  the  world's  war  debt. 

And  the  cost  sheets  do  not  show  that  other  great  item 
of  betterment  —  morale  in  the  ship's  crew. 

THE    MORALE    OF    SAILORS 

The  world's  shipping  before  the  war  had  got  into  such 
desperate  straits  in  morale  that  the  men  who  go  down  to 


Our  Merchant  Marine  293 

the  sea  in  ships  were  seldom  able  to  marry  and  main- 
tain families.  There  are  some  British  figures  that  show 
this  condition  in  a  striking  way.  About  sixty  thousand 
British  seamen  living  in  the  United  Kingdom  come  under 
the  health-insurance  law.  This  law  provides  a  maternity 
benefit  when  a  child  is  born  in  a  seaman's  family.  With 
a  birth  rate  of  about  twenty-five  children  annually, 
which  is  a  general  average,  sixty  thousand  seamen,  if 
married,  should  claim  three  thousand  maternity  benefits 
yearly. 

Actually,  less  than  eight  hundred  maternity  benefits 
a  year  are  said  to  have  been  paid  to  British  merchant 
seamen's  families  in  normal  times;  and  this  is  said  to 
indicate  a  world-wide  condition  among  merchant  sailors. 
It  shows  one  of  the  world's  essential  industries  disinte- 
grating through  blind  competition,  and  in  my  opinion 
the  remedy  must  be  some  form  of  international  system, 
if  not  control,  and  a  building  up  of  wages,  skill,  and 
morale,  which  will  give  the  seaman  a  home  and  a  family, 
like  the  railroader  or  machinist. 

With  the  motor  ship  we  can  have  an  entirely  new  era 
in  ocean  transportation.  It  calls  for  skill  and  effects 
economies  that  will  yield  good  wages ;  and  its  flexi- 
bility and  speed  should  facilitate  rearrangement  of 
the  world's  shipping  routes,  so  the  seaman  may  get 
home  more  frequently  and  have  a  home  worth  get- 
ting to.  ... 

The  Diesel  engine  has  been  widely  applied  in  Europe 
for  stationary  power  plants.  But  its  application  to 
ships  has  been  difficult.  This  requires  engines  of  very 
heavy  construction ;  and  as  the  mechanism  for  the 
gradual  introduction  of  the  fuel  into  the  compressed 


294  Reconstructing  America 

air  in  the  cylinders  is  intricate,  the  motor  ship  involves 
valve  problems  of  its  own. 

The  Scandinavians  have  made  the  greatest  progress 
in  motor  ships,  and  the  most  successful  Diesel  engines 
on  the  ocean  today  are  built  by  the  Danes,  Swedes,  and 
Hollanders,  or  under  their  patents.  We  have  built 
some  motor  ships,  as  have  the  British  also.  But  cer- 
tain difficulties,  to  be  overcome  by  wider  experience  in 
designing  the  engines  and  operating  the  ships,  have  re- 
tarded the  development  of  this  type.  However,  there 
are  now  prospects  of  active  development  for  the  motor 
ship  in  both  this  country  and  Great  Britain. 

The  British,  especially,  are  very  much  interested  hi 
this  new  type  of  ocean  ship,  and  their  splendid  technical 
achievements  in  naval  vessels  during  the  war  have  given 
them  new  methods  and  a  splendid  new  shipbuilding 
industry,  which  will  be  of  great  benefit  in  restoring  the 
British  merchant  marine  as  soon  as  peace  returns. 

And  that  is  as  it  should  be  and  what  every  broad- 
minded  American  will  rejoice  to  see ;  for  the  British 
merchant  marine,  no  less  than  the  British  Navy,  has 
played  a  leading  part  in  keeping  the  world  free. 

WHERE   IS    THE   OIL   TO   COME   FROM? 

If  the  world  should  turn  during  the  next  ten  years 
from  coal  to  fuel  oil,  and  from  steam  to  the  motor  ship, 
the  question  of  petroleum  supplies  will  become  important. 

At  present  the  largest  marine  consumption  of  petro- 
leum in  the  world  is  probably  that  of  the  United  States 
Navy,  estimated  at  five  million  barrels  yearly  under  war 
conditions.  This  quantity  would  not  go  far  in  operat- 
ing an  American  merchant  marine  of  twenty-five  million 


Our  Merchant  Marine  295 

tons.  Data  upon  which  to  figure  consumption  for  such 
a  fleet,  with  types  of  passenger  and  cargo  ships  running 
at  various  speeds  and  in  various  classes  of  service,  are 
not  yet  very  ample.  But  engineers  have  adopted  a 
rough-and-ready  ratio,  estimating  one  ton  of  oil  yearly 
to  a  ton  of  dead-weight  shipping,  where  the  fuel  is  burned 
for  steam,  and  half  a  ton  yearly  for  motor  ships. 

On  this  basis  the  American  merchant  marine  alone 
would  require  one  hundred  and  fifty  million  barrels 
yearly  for  steam,  or  seventy-five  million  barrels  for 
motor  ships.  The  world's  ocean  tonnage  was  fifty 
million  tons  before  the  war,  and  under  the  improvement 
and  cheapening  in  transportation,  made  possible  through 
petroleum,  might  increase  to  seventy-five  million  tons 
within  the  next  five  or  ten  years,  this  estimate  including 
our  own  merchant  marine. 

Thus,  for  seventy-five  million  tons  of  motor  ships 
there  would  be  required  yearly  somewhere  between  two 
hundred  million  and  two  hundred  and  fifty  million 
barrels  of  crude  oil.  This  is  approximately  half  of 
the  world's  total  present  production,  and  more  than 
eighty  per  cent  of  our  own  production. 

Where  is  the  oil  to  come  from? 

Fortunately  Nature  has  stored  supplies  in  the  earth 
for  precisely  this  situation.  Mexican  petroleum  is 
peculiarly  suited  for  marine  use.  In  the  district  round 
Tampico,  which  has  been  the  scene  of  petroleum  devel- 
opment for  the  past  eighteen  years,  there  are  two  types 
of  crude  oil  taken  from  opposite  sides  of  the  Panuco 
River,  which  runs  through  Tampico  and  divides  the 
district.  The  northern  type  of  oil  is  a  heavy  crude 
oil  that  cannot  be  refined,  but  is  suitable  for  burning  to 


296  Reconstructing  America 

make  steam.  The  southern  type  of  oil  is  lighter.  When 
refined  this  yields  about  twelve  per  cent  of  crude  gaso- 
line and  is  suited  for  Diesel  engines. 

No  such  oil  field  has  yet  been  located  in  any  other 
part  of  the  world.  The  Tampico  district  now  has 
about  fifty  wells  in  production,  with  an  estimated  ca- 
pacity of  fifteen  hundred  thousand  barrels  daily  —  more 
than  twice  as  much  oil  as  would  be  needed  to  operate 
the  world's  merchant  fleets  and  navies.  .  .  . 

It  is  so  very  much  worth  while  to  bring  the  world 
into  this  petroleum  age  that  development  of  new  oil 
resources  all  over  the  globe  will  be  one  of  the  chief  ac- 
tivities of  peace.  The  world  needs  Mexico's  petroleum 
for  its  growth  and  comfort.  Under  the  earth  in  the 
Tampico  district  are  resources  capable  of  influencing 
the  history  of  the  world. 

Out  of  the  lessons  of  international  adjustment  and 
teamwork  taught  the  nations  by  war  they  will  un- 
questionably find  methods  of  making  the  Mexican  oil 
supply  available  to  mankind  —  methods  which  will  not 
only  be  entirely  fair  to  the  Mexican  people,  but  which 
will  bring  them  stability,  growth,  and  prosperity. 

II 

WORKINGS  OF  THE  EMERGENCY  FLEET  CORPORATION 

BY  CHARLES   PIEZ 

Director-General  U .  S.  Shipping  Board  Emergency  Fleet  Corporation 

An  American  merchant  marine  of  15,00x3,000  dead- 
weight tons ! 

Just  this  will  accrue  to  our  country  from  the  activi- 
ties of  the  Emergency  Fleet  Corporation. 


Our  Merchant  Marine  297 

While  we  were  in  the  chaos  of  war  there  was  much 
confusion  in  the  public  mind  as  to  the  purposes  and 
workings  of  the  Emergency  Fleet  Corporation  and  its 
departments ;  and  now  that  peace  has  come  and  the 
great  emergency  has  become  a  thing  of  history  it  seems 
fitting  that  the  American  people  should  know  the  story. 

The  United  States  Shipping  Board  was  created  by 
act  of  Congress,  approved  Sept.  9,  1916,  "for  the  purpose 
of  encouraging,  developing,  and  creating  a  naval  auxil- 
iary and  naval  reserve  and  a  merchant  marine  to  meet 
the  requirements  of  the  commerce  of  the  United  States 
with  its  territories  and  possessions  and  with  foreign 
countries ;  to  regulate  carriers  by  water  engaged  in  the 
foreign  and  interstate  commerce  of  the  United  States ; 
and  for  other  purposes." 

The  Shipping  Board,  under  the  provisions  of  this  act, 
had  the  power,  if  in  its  judgment  such  action  was  neces- 
sary to  carry  out  the  purposes  of  the  act,  to  form,  under 
the  laws  of  the  District  of  Columbia,  one  or  more  cor- 
porations for  the  purchase,  construction,  equipment, 
lease,  charter,  maintenance,  and  operation  of  merchant 
vessels  in  the  commerce  of  the  United  States,  and  in  the 
exercise  of  the  power  so  granted  the  United  States 
Shipping  Board  Emergency  Fleet  Corporation  was 
organized  on  April  16,  1917,  with  a  capital  stock  of 
$50,000,000,  all  of  which  has  been  subscribed  for  by  the 
United  States  Shipping  Board  on  behalf  of  the  United 
States. 

As  the  Shipping  Board  is,  under  the  act,  charged  with 
the  responsiblity  of  doing  all  things  necessary  to  protect 
the  interest  of  the  United  States  in  the  Emergency  Fleet 
Corporation,  it  has  elected  to  place  the  control  of  the 


298  Reconstructing  America 

corporation  in  the  hands  of  a  board  of  seven  trustees, 
five  of  whom  are  the  five  Commissioners  composing  the 
United  States  Shipping  Board. 

CENTRALIZED   CONTROL 

The  control  of  the  Fleet  Corporation  by  the  Shipping 
Board  is  made  still  more  effective  by  the  fact  that  the 
Chairman  of  the  board  is  at  the  same  time  President  of 
the  corporation.  This  is  not  only  the  case  with  Edward 
N.  Hurley,  the  present  Chairman  of  the  Shipping  Board, 
but  was  also  the  case  with  the  former  incumbent, 
William  Denman.  It  is  evident  that  by  this  method 
of  control  the  vast  responsibilities  which  the  war  has 
created  in  regulating  water-borne  traffic,  in  constructing 
under  high  pressure  a  merchant  marine  of  more  than 
15,000,000  dead-weight  tons,  and  in  operating  not  only 
these  ships  as  they  were  constructed,  but  also  the  German 
tonnage  which  was  commandeered,  and  the  large  domes- 
tic and  foreign  tonnage  which  was  chartered,  rest  in  the 
final  analysis  upon  the  five  Commissioners  of  the  United 
States  Shipping  Board,  but  the  construction  of  a  fleet 
and  the  profitable  employment  of  the  fleet  were  two  such 
widely  differing  functions  and  required  such  utterly 
unrelated  experiences  that  they  could  best  be  accom- 
plished by  two  separate  corporations  and  two  separate 
Boards  of  Directors.  Proper  control  and  coordination 
through  the  Shipping  Board  was  still  possible  through 
stock  control,  and  its  consequent  power  to  elect  directors 
who  conducted  the  affairs  of  the  two  corporations  in 
accord  with  the  general  policy  laid  down  by  the  Shipping 
Board.  .  .  . 

In   the  popular   mind   the  Construction  Division  is 


Our  Merchant  Marine  299 

considered  the  Emergency  Fleet  Corporation,  and  as 
it  is  to  the  organization  of  this  division  that  this  article 
will  address  itself,  I  will  follow  the  popular  misconcep- 
tion and  refer  to  this  division  as  the  Fleet  Corporation. 

GROWTH   OF   CORPORATION 

The  corporation  began  in  reality  as  a  designing  and 
contracting  organization,  and  for  the  first  four  months 
of  its  existence  these  two  functions  overshadowed  all 
others.  On  Aug.  3,  1917,  however,  all  vessels  in  Amer- 
ican yards  under  construction  or  contract  for  either 
domestic  or  foreign  account  were  requisitioned,  and  this 
step  brought  the  control  of  the  construction  of  413 
vessels,  necessitating  the  addition  of  a  Division  of  Con- 
struction to  the  skeleton  organization  then  existing. 
The  requisitioning  of  these  vessels,  involving  as  it  did 
the  setting  aside  of  the  rights  of  owners,  brought  also  a 
crop  of  intricate  legal  questions,  which  brought  the  then 
embryonic  legal  division  into  prominence. 

But  the  country's  needs  for  ships  could  not  be  satisfied 
with  the  output  of  the  shipyards  then  existing,  and 
substantially  every  one  of  the  earlier  contracts  for  vessel 
construction  carried  with  it  the  obligation  of  constructing 
wholly  new  facilities.  In  most  cases  the  contractor 
furnished  only  a  portion  of  the  cost  of  the  shipyard, 
but  was  supplied  with  the  necessary  additional  working 
capital  through  advance  payments  made  under  contract 
provisions.  Designing  vessels  and  contracting  for  their 
construction,  which  constituted  the  first  place  of  the 
corporation's  work,  was  quite  naturally  followed  by 
plant  and  shipyard  construction  as  the  second  phase. 
In  the  meantime,  however,  the  demand  for  war  supplies 


300  Reconstructing  America 

was  making  heavy  inroads  not  only  on  the  available 
stocks,  but  on  the  producing  capacity  of  the  industries 
as  well,  and  the  Emergency  Fleet  Corporation  found 
itself  compelled  to  assume  increasing  responsiblity  for 
furnishing  all  of  the  new  yards,  and  many  of  the  old  ones, 
with  the  necessary  raw  and  finished  materials. 

In  the  construction  of  wood  steamers,  only  a  few  yards, 
for  instance,  accepted  contracts  for  the  delivery  of 
complete  ships ;  the  remaining  yards  undertook  the  con- 
struction of  wood  hulls  only,  for  which  the  Fleet  Cor- 
poration had  to  provide  not  only  the  lumber  and  fasten- 
ings, but  the  chains,  anchors,  and  other  hull  accessories 
as  well.  The  corporation  had  to  furnish  in  addition  the 
boilers,  piping,  engines,  propelling  machinery,  deck  ma- 
chinery, and  all  other  parts  of  the  equipment,  and  had 
to  construct  separate  plants  at  which  this  machinery 
and  equipment  could  be  installed  on  the  hulls  delivered 
by  the  hull  contractors.  The  construction  of  the  wood 
steamers,  particularly  in  the  absence  of  definite  ex- 
perience and  precedent,  presented  so  many  complica- 
tions that  it  called  for  the  separation  of  the  construc- 
tion division  into  two  divisions  —  one  controlling  steel 
ship  and  the  other  wood  ship  construction. 

As  the  construction  program  developed,  it  became 
evident  that  the  two  main  problems  confronting  the 
corporation  consisted  in  procuring  an  adequate  supply 
of  labor  and  an  adequate  supply  of  material  delivered 
in  proper  sequence.  On  Aug.  i,  1917,  the  number  of 
men  engaged  in  the  shipyards  was  in  the  neighborhood 
of  50,000,  and  that  number  under  the  drive  of  our  great 
necessity  was  increased  sevenfold  in  almost  as  many 
months. 


Our  Merchant  Marine  301 

The  problems  of  building  up  this  huge  army  of  workers 
were  numerous,  and  justified  the  creation  of  the  In- 
dustrial Relations  Division,  with  its  various  sections. 
The  labor  problem  was  further  complicated  by  the  fact 
that  in  the  scramble  for  the  very  limited  supply  of  labor, 
employers  in  all  the  war  industries  indulged  in  unreg- 
ulated and  unwholesome  increases  of  wages. 

REGULATION  OF  WAGES 

The  Division  of  Industrial  Relations  became  charged, 
therefore,  not  only  with  responsibility  connected  with 
the  labor  supply,  its  proper  maintenance  in  health  and 
safety,  and  the  adjustment  of  minor  differences  and  delin- 
quencies, but  it  had  to  accept  the  burden  of  occupational 
draft  deferments,  the  training  and  stimulation  of  workers, 
the  proper  allocation  of  the  available  labor  supply,  in- 
cluding the  elimination  of  "scamping,"  and  last,  but 
by  all  odds  the  most  difficult,  the  control  of  a  proper  ad- 
herence to  the  day  rates,  piece  rates,  and  classification  of 
occupations  established  by  the  Shipbuilding  Labor  Ad- 
justment Board. 

But  the  establishment  of  a  stable  and  effective  labor 
force  at  each  of  the  yards  involved  another  problem  of 
considerable  magnitude.  Unfortunately,  the  shipyards 
clustered  about  the  fringes  of  the  highly  congested  in- 
dustrial centers  of  the  seaboard  and  on  the  Great  Lakes, 
and  almost  everywhere  there  were  lacking  adequate 
transportation  facilities,  adequate  housing  facilities,  or 
both.  Ninety-five  million  dollars  was  appropriated  by 
Congress  to  relieve  :hese  conditions  in  the  shipyards 
alone  and  the  DivisiofTbf  Passenger  Transportation  and 
Housing  had  to  be  developed  in  record  time  to  assume 


302  Reconstructing  America 

charge  of  this  highly  important  piece  of  emergency  con- 
struction. 

The  necessity  of  building  up  rapidly  a  huge  army  of 
shipbuilders  out  of  a  labor  reservoir  made  up  in  no  small 
part  of  unassimilated  aliens  involved  another  task,  that 
of  creating  a  proper  esprit  de  corps,  of  inculcating  a 
realization  of  the  national  peril  and  the  individual's 
duty  in  the  face  of  that  peril,  of  arousing  the  latent 
patriotism  of  the  workmen  and  the  shipyard  communities, 
and  building  thereon  a  proper  conception  of  the  re- 
sponsibilities of  American  citizenship.  This  task  was 
effectually  accomplished. 

Procuring  an  adequate  supply  of  material  in  proper 
sequence  presented  in  essence  just  as  many  and  as  serious 
a  set  of  difficulties  as  did  the  supply  of  labor.  Beginning 
with  the  simple  act  of  purchasing,  the  failure  to  make 
deliveries  called  for  the  organization  of  a  production  and 
expediting  department,  and  the  necessity  of  bringing  the 
finished  material  to  the  completed  hull  presented  a 
difficult  task  in  allocation,  dispatching,  and  transporta- 
tion. It  must  be  borne  in  mind  that  the  Fleet  Cor- 
poration accepted  substantially  full  responsibility  for 
supplying  the  raw  materials,  the  finished  materials,  and 
the  machine  for  a  wood  ship  program  amounting  to 
$450,000,000,  and  that,  in  addition,  it  was  charged  with 
the  burden  of  getting  all  the  steel  and  a  large  part  of 
the  machinery  for  a  steel  ship  program  at  least  six  times 
that  size. 

Purchasing  was  but  a  minor  part  of  a  problem  which  in- 
volved responsibility  for  delay  in  supplying  material  of 
every  character  to  every  one  of  the  171  yards  under  con- 
tract with  the  corporation. 


Our  Merchant  Marine  303 

SUPPLY  DIVISION'S   WORK 

It  was  considered  that  to  concentrate  in  the  hands  of 
a  single  division  the  responsibility  for  buying,  and  de- 
livering to  the  yards  on  time  and  in  proper  sequence, 
all  the  material  the  corporation  was  charged  with  furnish- 
ing, and  the  functions  of  purchasing,  of  tracing  and 
expediting,  of  all  allocating  and  dispatching,  of  inspecting 
and  of  transporting,  which  in  the  earlier  days  of  our 
development  were  performed  by  three  different  depart- 
ments, were  thereupon  consolidated  under  the  control  of 
the  Supply  Division.  This  division  built  up  effective 
district  organizations  in  the  various  industrial  centers 
of  the  country  and  maintained  its  contact  with  the 
shipyards  through  representatives  in  the  offices  of  the 
District  Managers  in  the  shipbuilding  districts. 

The  concentration  of  the  responsibility  for  buying 
and  delivering  in  proper  time  under  one  head  resulted 
in  better  and  more  intelligent  purchasing,  and  in  a 
much  improved  estimate  of  the  extensions  to  manufac- 
turing facilities  which  the  intensified  shipbuilding  needs 
demanded. 

There  were  then  in  reality  two  great  supply  divisions, 
one  undertaking  to  provide  the  necessary  labor  and  the 
other  the  necessary  material,  and  these  two  divisions 
served  the  four  divisions  that  were  charged  with  the 
supervision  of  construction  :  the  Division  of  Housing 
and  Transportation,  the  Division  of  Shipyard  Plants, 
the  Division  of  Steel  Ship  Construction,  and  the  Divi- 
sion of  Wood  Ship  Construction.  Each  of  these  divisions 
developed  its  own  technical  department,  excepting  that 
in  the  case  of  the  two  ship  constructing  divisions  a  single 


304  Reconstructing  America 

technical  department  covering  both  naval  architecture 
and  marine  engineering,  for  both  steel  and  wood  ships, 
was  placed  under  the  administration  of  the  Division  of 
Steel  Ship  Construction. 

For  the  purpose  of  controlling  the  actual  construc- 
tion in  the  field,  the  country  was  originally  divided 
into  eleven  districts,  in  each  of  which  there  was  one  or 
more  representatives  of  each  of  the  construction  and 
service  divisions  and  sections. 

This  scheme  demonstrated  its  weakness  as  the  func- 
tions of  the  corporation,  and  therefore  the  representa- 
tives in  the  districts,  multiplied,  and  the  control  of  all 
of  the  functions  in  each  district  was  thereupon  placed  in 
the  hands  of  a  district  manager  who,  as  the  direct  rep- 
resentative of  the  Vice  President  and  -General  Manager, 
exercised  in  respect  to  the  districts  all  of  the  authority 
which  the  latter  exercised  over  the  operations  of  the 
corporation  as  a  whole.  The  number  of  the  districts 
was  reduced  from  eleven  to  eight,  and  the  organizations 
in  each  district  became  in  substance  a  cross  section  of 
the  organization  of  the  home  office. 

COORDINATION   EFFECTED 

Similar  decentralization  and  coordination  of  all  the 
war-making  and  war-serving  departments  of  the  Govern- 
ment could  have  been  effected  if  the  same  geographical 
districts  had  been  adopted  for  all  these  departments, 
and  if  a  representative  of  the  President  had  been  ap- 
pointed in  each  district  as  the  coordinating  officer  of  the 
district  heads  of  these  departments,  with  the  power  to 
review  and  veto  any  question  affecting  two  or  more 
departments.  The  pyramiding  of  wages,  the  placing 


Our  Merchant  Marine  305 

of  contracts  beyond  the  producing  capacity  of  the  dis- 
trict, the  duplication  of  facilities  could  largely  have  been, 
in  this  wise,  avoided ;  for  most  of  these  difficulties  arose 
out  of  the  wholly  unregulated  activities  of  the  several 
large  governmental  departments. 

The  control  exercised  in  these  respects  by  the  War 
Industries  Board,  beneficial  and  helpful  as  it  was,  did 
not  extend  far  enough,  nor  was  that  board  created 
early  enough  to  prevent  some  of  the  more  flagrant  of  the 
difficulties  which  impeded  the  industrial  processes  serv- 
ing the  war.  Had  the  war  continued  another  year,  the 
necessities  would  inevitably  have  led  to  an  organization 
controlling  and  coordinating  all  district  activities  of 
the  several  Government  agencies  and  departments, 
thereby  making  them  immediately  responsive  to  such 
a  national  directing  agency  of  industrial  processes  and 
needs  as  the  War  Industries  Board  finally  became. 
There  would  have  developed  out  of  such  an  organization 
a  national  labor  policy  consistent  in  its  aims  with  the 
industrial  needs  of  the  country  and  avoiding  the  need- 
less and  expensive  competition  for  the  limited  labor 
supply  by  contractors  having  cost  plus  or  remunerative 
lump  sum  contracts.  There  would  have  been  provided 
opportunities  of  disciplining  recalcitrant  contractors  who 
offended  both  the  canons  of  decency  and  the  implied 
obligations  of  contract. 

DIFFICULTY   IN   FINDING   RIGHT   MEN 

Every  division  of  the  Fleet  Corporation  presented 
problems  exceeding  in  number  and  magnitude  the 
problems  presented  by  an  industrial  or  commercial 
enterprise  doing  a  business  of  many  millions  a  year, 


306  Reconstructing  America 

and  every  division  required  an  organization  of  which 
the  organization  of  the  corporation  was  but  the  pattern. 
The  real  difficulty  lay,  not  in  choosing  the  general  form 
of  the  organization,  but  in  finding  men  who  had  not  only 
the  necessary  experience  and  capacity  for  the  job,  but 
the  proper  temperament  to  blend  quickly  and  har- 
moniously with  the  rest  for  the  smooth  and  effective  ac- 
complishment of  the  task.  Since  the  selection  of  the 
men  presented  the  chief  difficulty  we  had  no  hesitancy 
in  building  our  organization  around  the  mental  capac- 
ities and  the  temperamental  peculiarities  of  the  men 
we  had  available.  The  organization  of  the  Fleet  Cor- 
poration has  been  in  a  state  of  flux  from  the  first  and 
intentionally  so,  because  it  gave  an  opportunity  for 
those  quick  changes  and  rearrangements  which  emer- 
gency conditions  constantly  demand.  To-day,  with  the 
pressure  over,  some  of  the  functions  will  disappear, 
others  will  be  consolidated,  and  a  new  management,  ad- 
justed to  normal  conditions,  will  result. 

The  organization  through  the  last  six  months  of  its 
career  has  been  subjected  to  the  constant  critical  study 
of  an  Organization  and  Methods  Section,  attached  to 
the  staff  of  the  Vice  President  in  charge  of  administra- 
tion, and  this  section  has  suggested  administrative 
changes,  has  assisted  in  the  definition  of  duties  and  re- 
sponsibilities of  the  operating  units,  and  has  pointed  out 
duplications  of  work  and  inconsistencies  and  overlaps 
in  jurisdiction.  It  has  made  a  study  of  the  duties  and 
responsibilities  of  different  positions,  and  has  developed 
a  plan  for  bringing  about  uniformity  in  classification 
and  salaries  of  employees,  which  is  now  in  operation. 

Instructions  given  by  the  general  officers  of  the  cor- 


r,,i.yriglH  l.y    L'mliTwou.l   \    Underwood,    N.    V. 

IK  i\.     \\II.I.IAM     <',.     MCAIXH* 


Our  Merchant  Marine  307 

poration  are  issued  in  the  form  of  orders,  which  may  be 
either  general,  special,  or  technical ;  and  these  for  the 
purpose  of  securing  consistency  and  harmony  with  orders 
of  a  similar  character  previously  issued  are  cleared 
through  the  Organization  and  Methods  Section.  The 
necessity  of  such  a  constant  critical  study  of  an  organi- 
zation which  extraordinary  pressure  is  expanding  with 
great  speed  is  apparent,  and  its  value  in  reducing  such  a 
hastily  gathered  organization  to  a  well-balanced  effec- 
tive unit  is  open  to  no  doubt. 

Ill 

OUR  MERCHANT  MARINE  AND  RAILROADS 

Bv  HON.  WILLIAM   G.   McADOO 

The  glorious  victory  for  democracy  in  which  America 
has  played  such  a  noble  and  conspicuous  part  has  given 
her  a  commanding  position  in  world  affairs.  Our  own 
material  development  makes  it  more  than  ever  necessary 
that  we  shall  have  access  upon  just  and  fair  terms  to 
the  markets  of  the  world  for  the  disposition  of  our  surplus 
products.  America  must  go  forward  immediately  and 
organize  her  resources  effectively  for  the  purpose  if  she 
is  to  enjoy  her  share  of  the  fruits  of  the  keen  and 
friendly  rivalries  in  commerce  in  which  she  must  engage 
with  other  nations. 

Under  the  provisions  of  the  United  States  Shipping 
Act,  the  great  merchant  marine  we  are  constructing  is 
to  be  under  Government  control  for  a  period  of  five 
years  from  the  conclusion  of  the  European  War.  If 
our  splendid  merchant  fleet,  built  with  the  money  of  the 


308  Reconstructing  America 

people  of  the  United  States  at  a  cost  of  more  than  one 
billion  dollars,  is  to  be  used  successfully  in  their  interest, 
it  must  be  operated  in  effective  coordination  with  the 
great  railroad  systems  of  the  United  States.  They  must 
work  together  harmoniously  and  reciprocally.  During 
this  great  period  of  world  development,  involving  the 
vital  welfare  of  the  American  people,  it  seems  to  me  pecul- 
iarly wise  that  the  period  of  Federal  control  of  railroad 
transportation  shall  be  made  concurrent  with  that  of 
Government  ship  control.  Then  we  shall  have  a  great 
transportation  system  on  land  and  sea  furnishing  the 
reliable,  effective  service  which  will  protect  the  interests 
of  the  American  people  and  carry  them  forward  upon  a 
career  of  prosperity  and  success  unequaled  in  any  pre- 
vious period  in  their  history. 


CHAPTER  XV 
THE  AGRICULTURAL  OUTLOOK 

I 
OUR  FOOD  PRODUCTION,  PRICES,  AND  DISTRIBUTION 

BY  HON.  DAVID   F.   HOUSTON 

Secretary  of  Agriculture 

THIS  Nation  is,  relatively  speaking,  very  fortunately 
circumstanced  with  respect  to  its  supplies  of  food  and 
feedstuff's.  The  farmers  of  the  country  have  responded 
magnificently.  They  have  expanded  their  operations 
not  only  because  of  the  expectation  of  satisfactory 
returns,  owing  to  the  prevalence  of  large  demands 
and  good  prices,  but  they  have  also  patriotically  heeded 
the  appeals  of  this  Nation  and  of  the  allies  for  increased 
production.  The  facts  speak  for  themselves.  In  spite 
of  all  the  difficulties,  of  labor  disturbance  and  confusion 
in  every  direction,  the  first  year  of  the  war,  1917,  the 
farmers  planted  23,000,000  acres  more  of  the  leading 
food  crops  than  in  1916  and  32,000,000  more  than  the 
five-year  pre-war  average,  and  produced  record  crops 
of  most  products  except  wheat.  Of  course  the  partial 
failure  of  the  wheat  crop  was  in  no  wise  due  to  lack  of 
interest  or  activity  on  the  part  of  the  farmers.  They 
planted  a  large  acreage,  but  had  the  misfortune  to  lose 
by  winter-killing  the  largest  percentage  of  it  ever  re- 
corded. They  further  increased  the  acreage  of  the 
principal  food  crops  in  1918,  and  indications  coming  to 

309 


310  Reconstructing  America 

the  department  from  the  various  channels  at  its  dis- 
posal show  that,  in  response  to  the  suggestions  of  the 
department,  they  have  enlarged  their  plantings  of 
winter  wheat  and  rye  this  fail. 

LARGE  DEMAND  FROM  EUROPE 

Undoubtedly  the  demand  from  Europe  for  avail- 
able foodstuffs  until  the  next  harvest  season  will  be 
great.  -'\  ••!  * 

The  foreign  demand  will  be  for  a  great  variety  of 
foods  and  feedstuff's,  but  especially  for  certain  kinds 
of  fats.  It  is,  therefore,  highly  probable  that  prices 
for  current  supplies,  for  the  harvests  of  this  year,  both 
because  of  large  foreign  needs  and  of  continuing  domestic 
demands,  will  remain  reasonably  high  and  remunerative 
to  producers.  ; 

When  we  come  to  consider  the  situation  which  will 
prevail  a  year  from  now  and  what  should  be  done  in 
respect  to  further  production,  particularly  in  planning 
planting  operations  for  next  spring,  we  encounter  more 
difficulty  in  making  a  forecast.  There  are  too  many 
unknown  factors.  We  must  remember  that  European 
nations  will  omit  nothing  to  produce  those  things  with 
reference  to  which  they  can  get  a  prompt  response ; 
that  is,  bread  grains  and  fcedstuffs.  If  conditions  set- 
tle down  and  order  is  restored,  all  pains  will  be  taken 
to  systematize  production  and  to  have  those  countries 
become  as  fully  self-sustaining  as  possible.  Again, 
in  all  probability,  restrictions  on  trade  movement  will 
gradually  be  removed  and  ocean  as  well  as  land  trans- 
portation will  return  to  normal  in  due  course.  They 
will  doubtless  improve  in  the  near  future. 


The  Agricultural  Outlook  311 

TOO  EARLY  TO  SUGGEST  SPRING  PROGRAM 

It  is  clearly,  therefore,  too  early  to  make  detailed 
suggestions  for  the  spring  planting,  and  I  know  of  no 
one  who  is  wise  enough  to  say  what  the  supply  and 
demand  will  be  and  the  prices  which  will  prevail  a  year 
from  now.  The  Department  of  Agriculture  and  the 
agricultural  colleges  and  other  organizations  will  con- 
tinue to  study  the  situation,  keep  close  track  of  develop- 
ments and,  at  the  proper  time,  in  advance  of  the  next 
planting  season,  will  be  in  a  position  to  offer  sugges- 
tions. In  the  meantime,  we  must  not  fail  to  adopt 
every  feasible  means  of  relieving  the  farmers  of  economic 
burdens.  We  are  taking  active  steps  to  perfect  the 
local  organizations  cooperating  with  the  Federal  and 
State  agencies,  so  that  we  may  more  effectively  execute 
any  well-considered  plan  that  later  may  be  devised. 

OPPORTUNITIES  FOR  RETURNING  SOLDIERS 

What  shall  we  do  with  the  men  when  they  return 
from  France  and  what  will  become  of  those  engaged  in 
specialized  war  industries?  Will  not  those  who  have 
come  from  the  farms,  who  own  farms,  or  who  lived  on 
their  father's  farms,  as  a  rule,  return  to  them  as  quickly 
as  possible?  Certainly  the  farms  need  them.  Many 
others  have  professions,  trades,  or  occupations  awaiting 
them.  The  experience  of  some  of  the  nations  to  date, 
especially  Canada,  would  seem  to  indicate  that  the 
greater  percentage  of  the  returning  men  will  not  call 
for  special  action  on  the  part  of  the  Government.  How- 
ever, no  one  will  hesitate  to  say  that  every  considera- 
tion must  be  given  to  returning  soldiers  who  have  no 


312  Reconstructing  America 

places  waiting  for  them  and  who  will  be  seeking  new 
tasks.  They  deserve  well  of  the  Republic,  and  those 
who  wish  to  go  into  farming  who  have  had  any  experi- 
ence which  would  make  such  an  occupation  probably 
profitable  for  them  must  be  furnished  every  opportunity. 
The  Nation  and  the  States  will  unquestionably  come 
to  their  assistance,  and  every  feasible  thing  will  be 
done  to  secure  for  them  the  opportunities  they  seek 
somewhere  in  industry  or  in  agriculture. 

STILL  PIONEERING   THE   COUNTRY 

Of  course  this  country  is  not  yet  filled  up.  In  a  sense 
we  are  still  pioneering  it.  It  is  estimated  that  there  are 
1,140,000,000  acres  of  tillable  land  in  the  United  States 
and  that  only  367,000,000  acres  are  actually  in  culti- 
vation. 

We  must  consider  this  whole  question  in  the  light 
of  the  recent  past  and  of  the  probable  future  develop- 
ments. Many  people  think  too  much  in  terms  of  to-day. 
How  many  of  you  realize  that  this  Nation  in  the  15 
years  from  1900  to  1915  gained  a  population  of  22,- 
000,000,  nearly  three  fifths  that  of  the  Republic  of 
France,  a  nation  with  producing  and  consuming  power 
probably  greater  than  that  of  any  South  American 
country?  It  is  estimated,  also,  that  since  the  European 
war  broke  out  our  population  has  further  increased 
nearly  3,250,000,  largely  through  natural  growth. 
We  have  taken  care  of  this  population.  Those  who 
have  wished  to  farm  have  found  places.  Doubtless 
we  shall  gain  15,000,000  or  20,000,000  in  the  next  15 
years,  and  these,  too,  we  shall  take  care  of. 


The  Agricultural  Outlook  313 

PERSONAL   CREDIT  UNIONS 

Another  task  remaining  in  the  field  of  finance  is  to 
provide  a  proper  system  of  personal  credit  unions,  espe- 
cially for  the  benefit  of  individuals  whose  financial 
circumstances  and  scale  of  operations  make  it  difficult 
for  them  to  secure  accommodations  through  ordinary 
channels.  I  am  not  oblivious  to  the  fact  that  banks 
now  make  short-term  loans  of  a  great  aggregate  value 
to  farmers  possessing  commercial  credit,  but  there  are 
those  who  cannot  easily  avail  themselves  of  the  facili- 
ties they  offer.  This  would  appear  to  be  a  matter  pri- 
marily for  State  consideration  and  State  action.  Such 
course  has  been  approved  by  many  of  the  best  econo- 
mists and  seems  to  have  been  that  sanctioned  by  the 
joint  committee  of  Congress.  The  department  has 
formulated  a  tentative  model  law  for  personal  credit 
unions  and  is  ready  to  place  itself  at  the  service  of  any 
State  which  is  ready  to  undertake  legislation  in  this 
field.  A  number  of  States  already  have  adopted  laws 
for  personal  credits. 

LAND   SETTLEMENTS 

I  have  already  directed  attention  to  a  phase  of  the 
problem  of  land  settlement.  I  have  pointed  out  that 
we  are  still,  in  a  measure,  pioneering  the  country  and 
that  we  shall  be  called  upon  to  take  care  of  many  more 
millions  of  people.  Of  course,  we  cannot  induce  people 
to  stay  in  the  country  districts  or  to  take  up  farming 
unless  we  make  rural  life  profitable,  healthful,  and 
attractive.  Farmers  cannot  produce  merely  for  the  love 


SI  4  Reconstructing  America 

of  it.    They  must  consider  their  bank  balance  just  as 
other  business  men  do. 

It  would  be  desirable  to  facilitate  land  settlement 
in  more  systematic  fashion.  This  has  too  long  been 
left  to  the  haphazard  intervention  of  private  enter- 
prises, and  the  Nation  has  suffered  not  a  little  from 
irresponsible  private  direction.  I  think  it  is  high  time 
for  the  Federal  and  State  Governments  both,  as  well 
as  local  communities,  to  seek  to  aid  in  land  settlement 
by  furnishing  actual  facts,  reliable  information,  and 
agricultural  guidance  to  beginning  farmers  and  to 
promote  well-considered  settlement  plans. 

OWNERSHIP   OF   FARMS   SHOULD   BE  ENCOURAGED 

It  is  particularly  vital  that  the  process  of  acquiring 
ownership  of  farms  be  encouraged  and  hastened.  This 
is  now  the  process.  Tenancy  has  its  dark  sides,  but 
it  also  has  its  bright  sides.  In  no  inconsiderable  measure 
it  is  a  step  toward  ownership.  It  is  a  stage  through 
which  many  of  our  owners  have  passed  and  are  pass- 
ing. A  helpful  influence  in  this  direction  is  the  farm- 
loan  system,  and  especially  its  practice  of  having  vendors 
of  land  take  second  mortgages  subordinate  to  the 
first  mortgage  of  the  land  bank,  enabling  the  farmer  to 
secure  a  better  rate  of  interest  and  to  make  payments 
over  a  long  term  of  years.  I  have  no  doubt  that  the 
development  of  the  principle  of  cooperation,  especially 
in  respect  to  personal  credit  unions,  would  be  a  further 
step  for  hastening  this  process. 


The  Agricultural  Outlook  315 

STOCKYARDS  AND  PACKING  HOUSES 

The  matter  of  the  supervision  of  stockyards  and 
packing  houses  presents  a  problem  about  which  there 
has  been  much  discussion.  The  restoration  and  mainte- 
nance of  conditions  which  will  justify  confidence  in  the 
live  stock  markets  and  the  meat-packing  industry  is 
the  greatest  single  need  in  the  present  meat  situation 
in  the  United  States.  As  you  know,  the  department, 
at  the  direction  of  the  President,  is  now  administering 
under  license  the  control  of  the  stockyards  and  related 
industries.  The  important  results  already  accomplished 
under  this  authority  clearly  demonstrate  its  usefulness, 
and  emphasize  the  desirability  of  continuing  it  or  some 
other  adequate  form  of  supervision. 

The  question  also  of  exercising  similar  authority 
over  the  slaughtering,  meat  packing,  and  related  inter- 
ests is  one  for  serious  consideration.  The  economic 
welfare  of  meat  production  and  distribution  would  be 
promoted  by  the  continuation  and  development  in 
some  form  of  the  supervision  over  the  packing  industry. 
Such  control,  of  course,  should  be  closely  coordinated 
with  that  of  the  live  stock  markets,  and  there  should 
also  be  established  a  central  office  to  which  packing 
concerns  should  be  required  to  report  currently  in  such 
form  and  detail  that  it  would  be  constantly  informed 
concerning  their  operations.  The  necessary  legisla- 
tion should  be  enacted  at  the  earliest  possible  moment. 

The  situation  apparently  requires  three  remedies : 
namely,  regulation,  information,  and  voluntary  co- 
operation. Federal  regulation,  organized  and  admin- 
istered as  indicated,  and  exercised  in  close  harmony 


316  Reconstructing  America 

with  the  regulatory  bodies  of  the  various  States,  is 
the  most  essential  feature.  Constant  publicity,  under 
Government  direction,  of  current  market  prices,  sup- 
plies, movement,  and  other  conditions  pertaining  to 
the  marketing  of  live  stock,  meats,  and  animal  by- 
products, would  materially  increase  its  effectiveness.  It 
would  also  be  a  means  of  stabilizing  the  marketing  of 
live  stock  and  its  products  and  of  making  available 
the  information  required  by  producers  and  distributors 
in  the  marketing  of  their  products.  A  beginning  already 
has  been  made  in  the  creation  of  machinery  for  such 
service  as  market  centers,  and  legislative  authority 
for  its  further  development  should  be  continued  and 
extended. 

CONTINUATION    OF   EMERGENCY   ACTIVITIES 

Under  the  food  production  act  of  August  10,  1917, 
the  activities  of  the  department  have  been  expanded 
in  many  directions.  This  is  particularly  true  of  the 
extension  forces,  including  the  county  agents,  the  work 
relating  to  the  control  and  eradication  of  animal  diseases, 
and  the  market  news  services.  That  the  efforts  of  the 
department  in  emergency  directions  have  produced 
valuable  results  is  indicated  by  expressions  coming 
from  all  sections  of  the  Union.  If  the  finances  of  the 
Nation  permit  it,  it  seems  clear  that  adequate  provision 
should  be  made  for  the  continuance  of  at  least  a  part 
of  the  work  after  the  end  of  the  present  fiscal  year. 
I  have  already  transferred  to  the  regular  bill  the  esti- 
mates for  some  of  the  emergency  work  of  the  Bureau 
of  Markets.  It  would  also  be  wise,  I  think,  to  antic- 
ipate the  amount  that  will  accrue  under  the  agricul- 


The  Agricultural  Outlook  317 

tural  extension  act  when  it  reaches  its  full  development 
in  1922  and  to  make  such  further  provision  as  may  be 
necessary  for  the  continuance  of  agents  of  proved  effi- 
ciency already  on  the  rolls,  as  well  as  to  continue  the 
intensive  work  for  the  more  speedy  control  and  eradica- 
tion of  tuberculosis,  hog  cholera,  and  the  cattle  tick, 
and  other  important  lines  of  work.  Expenditures  for 
these  activities  are  investments. 

FARM  ECONOMICS  AND  FARM  MANAGEMENT 

I  have  also  been  keenly  interested  all  my  life  in  the 
economics  of  agriculture,  and  I  have  therefore  not  only 
emphasized  in  my  mind  the  necessity  for  developing 
a  strong  and  effective  bureau  of  markets,  but  also  an 
organization  here  for  the  satisfactory  study  of  the 
difficult  problems  of  farm  economics  and  farm  man- 
agement. I  have  by  no  means  been  satisfied  with 
some  of  the  work  of  the  present  Office  of  Farm  Manage- 
ment. I  refer  especially  to  the  studies  of  the  cost  of 
farm  crops.  It  is  unnecessary  for  me  to  point  out  the 
difficulties  of  securing  accurate  statistics  on  the  cost 
of  producing  an  agricultural  commodity.  Corn,  for 
instance,  is  produced  by  perhaps  6,000,000  farmers 
over  a  continental  area.  It  is  difficult  enough  to  ascer- 
tain the  cost  of  producing  corn  on  a  single  farm  where 
there  are  complex  operations.  It  is  equally  difficult 
to  secure  averages  in  a  given  area  that  are  helpful 
guides.  It  is  even  more  difficult  where  a  tenant  is  in- 
volved. Still,  averages  are  the  best  that  we  can  get. 
A  prerequisite,  however,  is  that  they  shall  be  based  on 
actual  and  distinct  studies  on  many  individual  farms, 
and  that  the  facts  shall  be  tubulated,  carefully  inter- 


318  Reconstructing  America 

preted,  and  set  out  under  the  proper  limitations.  This 
is  not  true  with  reference  to  the  studies  recently  much 
discussed.  Competent,  impartial  economists  and  stu- 
dents of  the  subject,  after  careful  investigation,  re- 
ported that  the  studies  were  little  more  than  expressions 
of  opinion  based  on  impressions  received  from  conversa- 
tions with  farmers,  that  the  interpretations  and  exposi- 
tions were  highly  unsatisfactory,  and  that  the  conclusions 
as  given  were  misleading. 

WHOLE   PROBLEM   IN    MIND 

I  have  the  whole  problem  actively  in  mind.  I  am 
calling  into  conference  the  best  students  of  farm  eco- 
nomics in  the  Nation,  including  the  heads  of  State 
farm  management  departments,  some  of  which  have 
developed  programs  superior  to  parts  of  ours,  and  I  shall 
hope  at  the  proper  time  to  lay  before  Congress  a  care- 
fully considered  series  of  projects  for  an  enlarged  Office 
of  Farm  Management.  I  shall  ask  for  sufficient  au- 
thority and  funds  to  secure  the  services  of  the  best 
staff  available  and  shall  plan  to  work  in  close  coopera- 
tion with  well-equipped  departments  in  State  colleges 
and  universities.  It  is  my  hope  that  the  Nation  shall 
not  again  be  caught  without  adequate  and  reliable 
cost  of  production  data  as  a  basis  for  its  thinking  and 
acting. 

I  have  in  mind,  I  trust,  not  only  further  concrete 
principles  for  the  improvement  of  the  agriculture  and 
rural  life  of  the  Nation,  but  a  vision  of  rural  life  toward 
the  realization  of  which  I  hope  to  see  the  department, 
the  colleges,  agricultural  organizations,  farm  papers, 
and  all  other  agencies  in  the  country  steadily  work. 


The  Agricultural  Outlook  319 

II 

OPPORTUNITIES  FOR  PROFITABLE  FARMING 

By  HON.  WILLIAM   G.   McADOO 

(From  the  Director-Generals  Annual  Report  for  1918) 

The  Agricultural  Section  of  the  Division  of  Traffic 
was  established  for  the  twofold  purpose  of  more  closely 
coordinating  the  agricultural  development  work  of 
the  railroads  under  Federal  control  with  the  allied 
departments  of  the  Government  and  of  prosecuting 
this  work  with  increased  vigor.  For  the  accomplish- 
ment of  the  former  a  policy  of  close  and  complete  co- 
operation with  the  Department  of  Agriculture  and  the 
Food  Administration  was  early  adopted  and  has  since 
been  followed,  while  the  latter  purpose  was  made  effec- 
tive by  directing  the  chief  efforts  of  the  agricultural 
agents  of  the  carriers  toward  aiding  in  the  most  practical 
and  energetic  manner  possible  the  campaigns  under- 
taken everywhere  for  increased  food  production. 

For  carrying  on  the  work  of  the  Agricultural  Section, 
the  48  States  have  been  divided  between  two  gen- 
eral committees  with  special  subcommittees  to  the 
end  that  the  agricultural  departments  of  the  railroads 
in  each  State  and  in  the  country  at  large  may  cooper- 
ate with  each  other  and  with  the  appropriate  Federal, 
State,  and  county  authorities,  including  also  civic 
bodies,  manufacturers  of  farm  implements  and  fertilizers, 
local  bankers  and  business  men,  that  they  may  har- 
monize and  coordinate  their  efforts  along  definite  lines 
and  that  possible  duplication  of  work  may  be  eliminated. 

The  experimental  or  scientific  part  of  the  work  is 
no  longer  undertaken  by  the  agricultural  departments 


320  Reconstructing  America  ' 

of  the  railroads,  but  is  left  to  the  United  States  Depart- 
ment of  Agriculture  and  the  several  States.  The  rail- 
road agricultural  agents'  work  is  more  along  the  lines 
of  dealing  with  the  transportation  problems  involved ; 
encouraging  the  production  of  new  or  different  farm 
products  and  increasing  that  of  old ;  bettering  their 
quality  and  preparation  for  market;  aiding  in  finding 
markets ;  and  bringing  about  improvements  in  farm 
methods  as  approved  by  competent  authorities. 


OPPORTUNITIES   FOR  PROFITABLE   FARMING 

With  the  coming  of  peace  and  restoration  of  normal 
conditions,  the  movement  of  returning  soldiers,  indus- 
trial workers,  and  others  to  the  farms  is  expected  to 
assume  large  proportions.  The  agricultural  representa- 
tives of  the  railroads  have  cooperated  in  all  sections 
in  getting  together  the  information  necessary  in  the 
consideration  of  the  plans  proposed  by  the  Department 
of  the  Interior  for  reclaiming  land  for  returning  soldiers. 
They  have  also  prepared  a  great  deal  of  information 
on  the  subject  of  farming  opportunities  along  the  sev- 
eral railroads  that  prompt  and  intelligent  reply  may 
be  made  to  the  many  inquiries  which  are  coming  in  from 
prospective  farm  settlers  in  this  and  foreign  countries. 

It  is  our  belief  that  the  opportunities  for  profitable 
farming  have  never  been  so  good  as  now  and  that  with 
the  wider  diffusion  of  modern  agricultural  knowledge 
and  the  strong  demand  for  farm  products  at  fair  prices 
there  will  be  in  the  next  few  years  a  measure  of  general 
advancement  among  progressive  farmers  never  ap- 
proached before. 


The  Agricultural  Outlook  321 

III 

THE  FOOD  PROBLEM  A  PROBLEM  FOR  THE  AMERICAN 

FARMER 

BY  HON.  HERBERT  C.   HOOVER 

United  States  Food  Administrator  and  Director-General  of  the  International  Reliej 
Organization 

The  dominating  food  problem  in  the  United  States 
at  this  moment  is  a  very  much  bigger  problem  than 
the  Chicago  packers.  It  is  a  problem  of  the  American 
farmer. 

If  the  packer's  profit  of  two  or  three  per  cent  on  his 
turnover  is  too  high,  it  is  the  duty  of  Congress  to  tax 
it  out  of  him.  If  the  farmer's  prices  threaten  to  fall 
below  the  level  of  a  fair  return,  it  behooves  the  country 
to  do  some  quick,  clear  thinking. 

The  perplexities  arising  out  of  inability  to  demobilize 
totally  the  food  situation  of  the  world  in  the  period 
between  the  armistice  and  peace  make  the  farmers' 
position  in  the  matter  of  much  more  immediate  con- 
cern than  the  future  of  the  Chicago  packers. 

ARMISTICE   CHANGES    SITUATION 

Taking  it  broadly,  before  the  European  war  began 
we  exported  about  five  million  tons  of  food  a  year. 
This  year  we  are  prepared  to  export  at  the  rate  of  from 
fifteen  to  twenty  million  tons.  The  increase  repre- 
sents the  patriotic  service  of  the  American  farmer  plus 
the  voluntary  sacrifice  of  the  average  American,  under 
the  stimulation  of  the  pleas  from  the  allied  govern- 
ments that  without  an  enormous  increase  in  our  food 
supplies  their  very  lives  would  be  menaced. 


322  Reconstructing  America 

The  submarine  had  so  shortened  the  world's  shipping 
that  the  Allies  were  unable  to  reach  the  distant  markets 
of  the  southern  hemisphere,  and  we  were  bound  to 
create  in  America  sufficient  food  to  carry  Europe.  If 
the  war  had  gone  on  every  pound  of  it  and  more  would 
have  been  required  by  the  Allies  before  next  harvest. 

The  armistice  came  suddenly,  freeing  shipping  from 
military  use  and  reopening  to  the  Allies  the  cheaper 
southern  hemisphere  and  the  colonial  markets,  where, 
in  addition,  they  could  have  more  liberal  credits  and 
markets  for  their  manufactures. 

AMERICAN  SUPPLIES   A   PROBLEM 

We  are  thus  faced  with  a  serious  problem  with  respect 
to  our  own  great  supplies,  patriotically  accumulated. 
If  an  early  peace  is  signed  and  the  markets  of  Europe 
are  opened  freely  to  trade,  there  will  be  a  greater  demand 
for  food  from  the  new  mouths  than  ever  this  surplus 
could  supply.  But  in  the  period  between  the  armistice 
and  peace  we  have  a  very  difficult  situation. 

One  of  the  most  critical  food  shortages  in  the  world 
was  that  of  fats,  and  the  only  help  lay  in  an  increase  in 
the  American  hog.  Our  Agricultural  Department  and 
the  Food  Administration  spared  no  efforts  to  stimulate 
this  production.  Our  farmers  were  assured  that  in 
the  general  shortage,  subject  only  to  the  uncertainties 
of  war,  they  would  experience  no  difficulty  in  marketing 
their  products.  Due  to  the  savings  of  our  people  and 
the  gradual  increased  production  of  our  farmers,  we 
have  lifted  our  ability  to  export  50,000,000  pounds  of 
fats  per  month  in  the  summer  of  1917  to  400,000,000 
pounds  per  month  in  this  January. 


The  Agricultural  Outlook  323 

PACKERS  AND   FARMERS   MOBILIZED 

To  achieve  this  mobilization  of  fats  it  was  necessary 
to  mobilize  the  packers  as  well  as  the  farmers.  There 
is  no  doubt  that  the  vast  volume  of  business  brought 
profit  to  the  packers,  although  at  a  less  percentage  than 
before  the  Food  Administration  took  charge  of  it. 

The  allied  nations,  in  order  to  effect  regular  supplies 
to  their  people  in  the  face  of  short  shipping  and  to  provide 
for  government  rationing,  were  compelled  to  take  over 
the  entire  purchase  of  these  food  supplies  and  thereby 
abandon  the  ordinary  flow  of  trade  and  commerce. 
In  consequence,  they  concentrated  their  buying  through 
agencies,  and  the  power  of  these  buying  agencies  was  so 
great  that  they  controlled  the  price. 

The  business  of  the  Food  Administration  was  to 
bring  these  buying  agents,  the  representatives  of  the 
farmers,  who  are  predominatingly  interested,  and  the 
great  and  small  packers  together  and  to  see  to  it  that 
a  square  deal  was  obtained  all  around.  The  prices 
were  settled  in  a  joint  conference  of  the  farmers,  the 
representatives  of  the  Allies'  buyers  and  the  great 
and  small  packers,  under  the  general  arrangement  that 
the  packer  was  allowed  but  a  quarter  of  a  cent  a  pound 
over  and  above  the  price  to  the  farmer  and  the  cost 
of  raw  material  and  labor  for  packing.  The  Allies 
took  the  entire  surplus. 

PROTECTION   FOR   THE    FARMER 

The  situation  changed  over  night  with  the  armistice. 
The  Allies  are  not  only  seeking  the  southern  hemisphere 
markets  but  they  also  lately  have  accumulated  large 


324  Reconstructing  America 

stocks  of  fats  as  an  insurance  against  the  submarine 
menace.  Freed  from  this  menace  and  with  the  shortage 
of  finance  experienced  by  all  governments,  together 
with  the  loss  in  the  storage  of  commodities  by  deteriora- 
tion, there  is  a  natural  desire  on  their  part  to  reduce 
their  stocks. 

Other  factors  have  entered  into  the  situation.  For 
instance,  the  inactive  armies  and  munition  workers 
are  consuming  less  fats,  and  the  vegetable  is  freed  for 
human  consumption.  This  came  upon  us  immediately 
with  the  armistice  in  early  November  in  the  midst  of  our 
heaviest  hog  marketing  season,  which  lasts  from  Octo- 
ber until  March.  When  I  left  home  for  Europe  in 
November  this  problem  already  was  facing  me  as  one 
among  many  others  for  which  assistance  had  to  be 
found  in  the  protection  of  our  American  farmers,  lest 
from  failure  to  find  a  market  for  his  product  during  the 
armistice  and  pending  the  wider  markets  of  peace  his 
prices  might  fall  below  his  cost  of  production,  entailing 
great  waste  of  surplus  commodities. 

We  have  found  it  possible  to  protect  the  American 
farmer  in  the  two  and  one-half  months  since  the  armis- 
tice. This  we  have  done  by  cooperating  with  the 
Allies,  in  opening  wider  markets  to  neutral  countries 
and  by  relief  shipments  into  the  liberated  territories. 
The  next  and  last  six  weeks  of  the  high  fat  production 
season  will  be  still  more  difficult  to  manage,"as  peace  can- 
not be  expected  in  that  time,  restoring  extended  markets. 

SEES   RELIEF   BY   NEXT   MAY 

On  the  other  hand,  five  sixths  of  this  problem  is 
already  completed,  and  by  next  May,  if  we  have  peace 


The  Agricultural  Outlook  325 

and  freedom,  any  surplus  that  accumulates  now  will 
be  turned  into  another  world  shortage  of  fats.  Indeed, 
if  the  entire  consuming  populations  of  the  world  were 
able  to  obtain  fats  to-day,  there  would  be  a  shortage 
at  this  moment,  even  with  our  great  surplus  production. 

Numerous  solutions  have  been  proposed.  It  has 
been  considered  that  the  allied  governments  should 
continue  to  purchase  the  surplus  production  of  pork 
products  despite  the  accumulated  stocks  and  lack  of 
immediate  need,  and  thus  protect  the  American  farmer 
against  the  surplus  provided  especially  for  them.  It 
has  been  contended  that  they  are  under  moral  obliga- 
tions to  execute  the  forecasts  of  their  requirements 
given  from  time  to  time  through  their  various  agencies. 

The  Allies  can,  however,  contend  that  they  also 
have  great  problems  of  excess  production  in  commodities 
such  as  munitions,  which  they  have,  likewise,  produced 
under  war  pressure.  They  can  contend  that  we  have 
jointly  fought  and  won  the  war ;  that  this  is  sudden 
and  catches  us  all  with  a  vast  production  which  must 
be  faced  and  liquidated  by  each  of  us  without  undue 
pressure,  one  against  the  other ;  that  they,  like  our- 
selves, are  entering  a  period  of  large  unemployment 
during  the  readjustment ;  and  that  their  people,  like 
ours,  need  lower  food  prices. 

The  real  solution  lies  in  the  hope  of  early  peace,  and 
in  the  meantime  the  steady  demobilization  of  all  restric- 
tions on  free  marketing  of  surplus  foods,  except  in  enemy 
territory,  thus  reestablishing  the  law  of  supply  and 
demand. 

Practically  all  restrictions  on  American  food  exports 
have  been  removed.  Progress  has  been  made  in  lifting 


326  Reconstructing  America 

neutral  blockade  restrictions,  and  further  relaxations 
of  blockade  measures  are  under  earnest  consideration. 
The  readjustment  of  consolidated  buying  agencies  is 
hoped  for,  in  order  that  merchants  may  enter  upon 
trade  freely  on  both  sides  and  thus  secure  a  normal 
basis  of  price  determining,  without  any  dominating 
influences. 

It  is,  however,  no  more  possible  to  demobilize  in  a 
week  the  whole  of  these  intricate  forces  set  up  during 
the  war  than  it  is  to  demobilize  our  army  by  dismiss- 
ing it  on  the  field.  And,  pending  these  solutions,  our 
American  farmers,  merchants,  packers,  and  banks 
simply  must  stand  together  for  two  or  three  months  to 
carry  our  excess  surplus  over  until  the  markets  of  the 
world  have  been  more  extended  and  finally  liberated 
by  peace. 

IV 

OPERATIONS  or  THE  FEDERAL  LAND  BANKS 

BY  HON.  CARTER    GLASS 

Secretary  of  the  Treasury 

(Prom  the  Second  Annual  Report  of  the  Federal  Farm  Loan  Board,  Dec.,  191$) 

Our  first  report  covered  the  period  from  the  organiza- 
tion of  the  board  up  to  November  30,  1917,  and  was 
necessarily  made  up,  in  large  part,  of  an  account  of  the 
organization  of  the  farm  loan  system.  .  .  . 

The  present  report  covers  what  may  be  regarded 
as  the  first  year  of  operation,  as  distinguished  from 
organization.  It  has  been  a  year  of  very  evident  prog- 
ress. The  number  of  farm  loan  associations  chartered 
has  grown  from  1839  to  3439.  The  capital  of  the  12 


The  Agricultural  Outlook  327 

Federal  land  banks  has  grown  from  $10,488,230  to 
$16,250,285.  The  amount  of  loans  in  force  has  grown 
from  $29,816,304  to  $149,004,439.  The  number  of 
joint  stock  land  banks  has  grown  from  four  to  nine, 
and  their  loans  now  amount  to  $7,380,743.  The  loans 
of  the  Federal  land  banks  have  been  made  at  either  5 
per  cent  or  5^  per  cent  interest.  Most  of  those  made 
by  the  joint  stock  land  banks  have  been  at  6  per  cent. 
The  loaning  of  this  sum  of  over  $150,000,000  has  been 
of  distinct  and  direct  benefit  to  more  than  64,000  bor- 
rowers, and  has  been  of  indirect  benefit  to  every  applicant 
for  a  farm  loan  through  private  agencies.  A  distinct 
reduction,  not  only  in  the  rate  of  interest  on  such  loans, 
but  also  in  the  accompanying  charges  and  commissions, 
was  manifest  almost  immediately  after  the  passage 
of  the  act.  When  general  conditions  made  necessary 
in  December,  1917,  an  advance  of  one  half  of  i  per  cent 
in  the  rate  charged  by  the  Federal  land  banks,  there 
was  a  proportionate  increase  in  the  rates  charged  by 
most  of  the  private  agencies ;  but  these  rates,  even  in 
these  days  of  stringency  and  stress,  are  little,  if  any, 
higher  than  they  were  in  the  normal  times  of  easy 
money,  prior  to  the  establishment  of  the  Federal  farm 
loan  system,  and  in  many  localities  even  lower.  There 
could  be  no  more  conclusive  proof  of  the  regulatory 
effect  of  the  system. 

ECONOMIC   ADVANTAGES   OF   THE    SYSTEM 

Bearing  in  mind  the  facts  that  the  total  volume  of 
the  farm  loans  of  this  country  is  estimated  at  $4,000,- 
000,000,  and  that  the  interest  upon  this  vast  sum  is 
paid  by  toilers  in  the  least  remunerative  and  most 


328  Reconstructing  America 

essential  of  all  industries,  it  is  plain  that  the  economic 
advantages  of  the  system  have  been  demonstrated  be- 
yond the  possibility  of  doubt.  .  .  . 

In  so  far  as  the  loans  made  by  the  banks  have  been 
for  the  purpose  of  putting  land  under  cultivation,  or 
for  the  purchase  of  farm  equipment,  live  stock,  or  fertili- 
zers, these  loans  have  directly  tended  to  the  increase 
of  agricultural  production.  Still  more  valuable  than 
this  direct  money  assistance  has  been  the  effort  which 
the  banks  have  made  to  educate  farmers  to  better 
agricultural  methods,  and  in  many  cases  to  enforce 
their  suggestions  by  making  them  a  condition  to  the 
granting  of  loans.  .  .  . 

The  total  payments  due  by  borrowers  to  the  banks  up 
to  October  31,  1918,  exceeded  $3,247,000,  and  on  that 
date  only  $86,073  of  this  amount  remained  unpaid,  of 
which  only  $10,730  was  90  days  or  more  overdue. 
We  scarcely  venture  to  hope  that  such  an  exceptional 
record  as  this  can  be  permanently  maintained,  but  the 
present  figures  bear  testimony  to  the  care  with  which 
loans  have  been  made,  and  justify  the  belief  that  losses 
on  defaults  and  foreclosures  will  be  negligible  in  com- 
parison with  the  great  volume  of  business  done. 


CHAPTER   XVI 

DEMOBILIZATION  AND   UNEMPLOYMENT 
I 

GOVERNMENT  FARM  PLAN  TO  HELP  SOLDIERS 

s 

BY  HON.  FRANKLIN   K.   LANE 

Secretary  of  the  Interior 

SECRETARY  LANE,  author  of  the  soldiers'  land  settle- 
ment legislation  pending  before  Congress  and  submitted 
to  the  Governors  of  the  various  States,  has,  at  the  request 
of  soldiers,  outlined  the  scope  and  status  of  the  Govern- 
ment's plan  for  providing  work  and  farm  homes  for  dis- 
charged soldiers.  His  statement  follows  : 

A  perusal  of  the  letters  already  filed  in  the  Depart- 
ment of  the  Interior  will  convince  the  most  cynical 
critic  of  the  plan  that  land  hunger  is  to-day  as  unsatisfied 
as  it  was  after  the  Civil  War,  that  hundreds  of  thousands 
of  our  virile  American  citizens  will  welcome  the  oppor- 
tunity to  continue  working  for  Uncle  Sam  and  help  him 
build  the  necessary  dams  and  canals,  dig  the  drainage 
ditches,  blow  the  stumps,  erect  houses  and  barns,  and 
construct  roads  and  lay  out  town  sites. 

Every  letter  is  an  animated  question:  "Where  is 
this  land?"  ''How  soon  can  we  begin  work?"  "Has 
Congress  appropriated  the  money  necessary  for  con- 
struction?" 

There  are  letters  from  France ;   letters  from  camps  in 


330  Reconstructing  America 

the  United  States;  letters  from  officers  and  letters  from 
privates ;  letters  from  soldiers  of  former  wars ;  letters 
from  soldiers'  wives,  — all  breathing  the  spirit  of  the  open 
air  and  of  the  desire  to  be  a  part  in  this  ' '  back  to  the  land 
movement"  which  needs  only  the  appropriation  of  the 
necessary  funds  to  make  it  a  reality. 


$IOO,OOO,OOO   ASKED 

Under  the  legislation  now  being  considered  by  the 
House  Appropriations  Committee,  Congress  is  asked 
to  appropriate  $100,000,000  for  the  purpose  of  providing 
employment  and  farms  with  improvements  and  equip- 
ment for  honorably  discharged  soldiers,  sailors,  and 
marines  of  the  United  States. 

Two  factors  are  at  the  foundation  of  the  plan  under 
consideration :  On  the  one  hand  thousands  of  acres  of 
non-productive  land,  a  veritable  "no  man's  land"  of  deso- 
lation ;  on  the  other  4,000,000  or  more  returned  fighting 
men  who  will  want  jobs  or  an  opportunity  to  attain  a 
home. 

Land  reclaimed  in  the  manner  suggested  is  to  be  dis- 
posed of  under  general  regulations  so  as  to  insure  the 
reimbursement  for  the  investment  to  the  United  States 
during  a  term  not  exceeding  forty  years  from  date  of 
entrance  upon  the  land  by  the  settler,  together  with 
annual  interest  at  4  per  cent.  The  Secretary  of  the 
Interior  is  authorized  to  make  any  arrangements  and 
to  perform  all  acts  necessary  in  connection  with  the  de- 
velopment of  any  project  by  purchase  or  condemnation, 
for  effectuating  the  purpose  of  the  scheme. 


Demobilization  and  Unemployment    331 

STATE   COOPERATION   ASKED 

In  addition  there  has  been  forwarded  to  the  Governor 
of  each  State  a  suggested  bill  for  the  consideration  of 
State  legislatures,  providing  for  cooperation  between 
the  States  and  the  United  States.  The  general  scope 
of  the  State  legislation  is  expressed  in  the  first  section  of 
the  proposed  act  as  follows  : 

Sec.  i.  The  object  of  this  act  is,  in  recognition  of 
military  service,  to  provide  useful  employment  and  rural 
homes  for  soldiers,  sailors,  marines,  and  others  who  have 
served  with  the  armed  forces  of  the  United  States  in  the 
European  war  or  other  wars  of  the  United  States,  in- 
cluding former  American  citizens  who  served  in  Allied 
armies  against  the  Central  Powers  and  have  been  repa- 
triated, and  who  have  been  honorably  discharged,  and 
to  accomplish  such  purpose  by  cooperation  with  the 
agencies  of  the  United  States  engage  in  work  of  a  similar 
character.  This  act  may  be  cited  as  "the  (name  of 
State)  Soldier  Settlement  Act." 

The  whole  subject  is  being  considered  by  the  House 
Appropriations  Committee  as  a  part  of  the  Sundry 
Civil  Appropriation  bill  now  before  the  committee.  It 
will  be  possible  to  begin  operations  under  Federal 
authority  as  soon  as  the  requested  appropriation  is  forth- 
coming. 

SPECULATION    BARRED 

As  I  have  pointed  out  before,  these  farms  should  not 
only  be  so  small  that  they  would  not  be  speculative 
ventures  in  unearned  increment,  but  they  should  be 
non-transferable  to  any  one  holding  an  equally  large 


332  Reconstructing  America 

tract  of  land  in  the  same  State.  This  will  prevent  their 
being  aggregated  into  great  estates.  To  compel  their 
use  the  owner  might  be  required  to  live  on  the  land  for 
five  years.  <i 

May  I  repeat,  there  can  be  no  surer  insurance  for 
the  nation  than  to  put  its  men  on  the  soil,  and  there 
can  be  no  wiser  investment  that  a  nation  can  make 
than  to  add  to  its  territory  by  taking  from  desert  and 
waters  and  desolation  land  that  is  now  useless. 

II 

REBUILDING  THE  INJURED  SOLDIER 

BY  HON.  HOKE  SMITH 

Prior  to  the  present  war,  the  policy  even  of  the  most 
advanced  nations  was  to  care  for  their  crippled  and 
disabled  men  with  small  pensions,  leaving  them  to 
recruit  the  ranks  of  mendicants ;  but  now,  and  for  years 
to  come,  every  unit  of  productivity  will  be  needed,  and 
useful  occupation  may  cheer  the  lives  of  the  injured, 
while  it  serves  their  country. 

Having  bet'i  Chairman  of  the  Senate  Committee  on 
Education  anH  Labor  for  the  past  six  years,  I  feel  I  can 
give  assurance  that  no  effort  and  no  expense  will  be 
spared  by  our  Government  to  fit  disabled  fighters  for  self- 
sustaining  positions,  and  to  aid  them  in  securing  such  posi- 
tions. This  work  will  be  done  by  the  National  Govern- 
ment in  the  performance  of  an  obligation,  and  not  as  an  act 
of  charity.  We  owe  it  as  an  obligation  to  those  injured 
in  the  war.  We  will  need  them  rehabilitated  as  a  force 
in  our  national  life. 

Each  American  soldier,  sailor,  and  marine  suffering 
permanent  disability  must  be  and  will  be  offered  and 


Demobilization  and  Unemployment    333 

urgently  pressed  to  accept  an  opportunity  to  reestablish 
a  place  in  life  for  himself  and  society  as  good  as  or  better 
than  the  one  he  occupied  before  entering  the  national 
service. 

The  Belgians  founded  a  school  for  crippled  soldiers  in 
France  at  which  "not  only  are  disabled  soldiers  trained 
in  new  occupations,  but  the  school  in  the  course  of  its 
operation  produces  enough  supplies  for  the  Belgian 
army,  to  make  the  enterprise  self-supporting." 

England,  Italy,  Canada,  and  Australia  have  accepted 
the  new  view.  They  are  training  the  disabled  soldiers 
along  the  most  varied  lines,  suiting  their  new  occupa- 
tions to  their  physical  and  mental  conditions,  and  holding 
out  to  each  the  opportunity  to  come  back  and  be  a  real 
force,  —  independent,  self-supporting,  and  contributing 
to  his  country's  progress. 

HOW  OUR  GOVERNMENT  WILL  REHABILITATE  SOLDIERS 

More  than  a  year  ago  the  problem  of  furnishing  oppor- 
tunity for  rehabilitation  to  our  own  disabled  soldiers 
and  sailors  attracted  attention  in  many  parts  of  our 
country,  and  especially  in  Washington.  More  than  one 
commission  was  formed  of  voluntary  workers  to  con- 
sider the  subject.  I  presented  a  resolution  to  the  Senate, 
requesting  the  Federal  Board  for  Vocational  Education 
to  investigate  and  furnish  information  to  the  Senate 
which  might  aid  the  Senate  Committee  on  Education 
and  Labor  in  the  preparation  of  legislation.  This  was 
done,  and  the  information  was  valuable.  Finally,  a 
board,  composed  in  part  of  representatives  of  the  Navy, 
of  the  Army,  and  of  the  Federal  Board  for  Vocational 
Education,  prepared  a  bill,  which  was  substantially 


334  Reconstructing  America 

the  bill  I  introduced  in  the  Senate,  and  which  was  ap- 
proved by  the  Senate  Committee  on  Education  and 
Labor.  This  bill  has  become  a  law,  and  under  it  the 
Federal  Board  for  Vocational  Education  has  charge  of 
vocational  rehabilitation  of  disabled  soldiers. 

The  law  provides  that  the  disabled  soldier,  when  dis- 
charged from  the  hospital,  shall  come  within  the  super- 
vision of  the  Federal  Board  for  Vocational  Education. 
While  he  is  in  the  hospital,  he  is  under  the  control  of  the 
Surgeon-General's  office ;  but  the  Federal  Board  for 
Vocational  Education,  through  educational  experts, 
may  act  in  an  advisory  capacity  to  the  surgeons  in  the 
hospital. 

In  the  hospital  all  is  to  be  done  that  may  be  done  to 
restore  physically  the  injured  soldier ;  to  make  him  again 
sound  if  possible, —  if  limbs  are  lost,  to  furnish  artificial 
limbs,  or  rather  mechanical  appliances  of  a  character 
suited  for  actual  use  rather  than  for  ornament. 

In  the  hospital,  and  even  before  the  patient  reaches 
the  hospital  in  the  United  States,  every  effort  is  to  be 
made  to  inspire  hope  and  confidence  that  the  injured 
man  may  again  be  able  to  play  a  part  in  the  peaceful 
forces  of  his  country. 

TRAINING   TO   COMMENCE    IN   THE   HOSPITAL 

The  work  in  the  hospital  will  be  made  to  dovetail  in 
with  what  the  patient  will  be  advised  to  take  up  perma- 
nently, but  it  will  essentially  be  only  an  introduction 
to  the  real  vocational  training  which  it  is  hoped  the  in- 
jured soldier  will  utilize  in  the  broad  way  after  he  leaves 
the  hospital. 

The  Government  has  set  aside  a  fund  of  $2,00x2,000 


Demobilization  and  Unemployment    335 

for  this  work  during  the  present  fiscal  year.  That 
amount  was  appropriated  because  some  fixed  sum  had 
to  be.  Whatever  is  needed  will  be  given,  for  this  year 
or  the  next  or  the  next. 

Complete  authority  for  carrying  on  the  work  is  given 
the  Federal  Board  for  Vocational  Education.  We  were 
fortunate  in  having  already  established  that  organiza- 
tion which  had  developed  much  of  the  needed  machinery. 

Not  until  the  soldier  is  discharged  from  the  service  and 
is  again  a  civilian  will  the  full  work  of  vocational  re- 
habilitation begin.  The  Vocational  Board  will  assist  the 
hospitals  in  providing  light  occupational  training  during 
convalescence,  which  training  will  be  selected  first  for  its 
therapeutic  value,  and  second  for  its  occupational.  The 
Board  may  have  representatives  in  the  hospitals  to  advise 
with  its  managers  about  such  work  and  to  study  and 
advise  the  patients  and  to  assist  in  conducting  the  oc- 
cupational work  carried  on  there. 

By  the  time  the  patient  is  ready  to  leave  the  hospital, 
he  should  have  been  able  to  decide  what  new  occupation, 
if  any,  he  shall  accept  training  in,  and  probably  will 
already  have  begun  preparation  for  it.  Then  the  Vo- 
cational Board  takes  full  control,  the  Surgeon-General's 
office's  relation  to  the  case  becoming  what  the  Board's 
to  that  time  will  be ;  that  is,  advisory. 

Virtually  the  only  substantial  disagreement  in  working 
out  a  general  plan  was  as  to  whether  it  would  be  best 
for  the  army  or  navy  to  retain  complete  control  of  the 
disabled  man  until  he  was  vocationally,  as  well  as  phys- 
ically, restored.  Some  thought  it  would  be  best  to  keep 
him  technically  in  the  service  during  his  vocational 
training  so  that  he  would  be  fully  amenable  to  the  rules 


336  Reconstructing  America 

of  military  discipline.  This  method  was  at  first  under- 
taken by  some  of  our  Allies  and  found  to  be  unsatis- 
factory. In  France,  while  the  men  were  continued  under 
military  control,  eighty  per  cent  refused  to  undergo 
occupational  training.  In  England,  where  civilian  con- 
trol was  adopted  and  the  men  allowed  to  volunteer  for 
reeducation,  eighty  per  cent  willingly  took  the  training. 

RESTORING   SELF-RELIANCE  AND   INITIATIVE 

Furthermore,  the  training  is  more  effective  when  it 
is  carried  on  away  from  military  restraint.  A  great 
deal  of  military  psychology  must  be  "trained  out"  of 
the  men  before  they  become  fully  efficient  industrial 
workers. 

They  must,  in  large  measure,  be  re-taught  self-re- 
liance, initiative,  confidence,  which  can  best  be  done 
when  they  are  removed  from  every  semblance  of  mili- 
tary authority. 

It  is  also  left  with  them  to  decide,  first,  whether  they 
shall  take  up  training  at  all,  and,  second,  for  what  oc- 
cupation they  shall  be  trained.  The  Vocational  Board 
may  advise  them  and  will  do  so  with  great  care,  after 
studying  each  case  and  placing  before  each  man  informa- 
tion as  to  occupations  he  may  be  fitted  for,  but  it  cannot 
coerce.  The  only  penalty  provided  in  the  law  is  that, 
after  the  disabled  man  has  accepted  and  begun  training 
and  then  abandons  it,  the  allowances  granted  him  under 
the  War  Risk  Insurance  Act  may  be  temporarily  sus- 
pended at  the  discretion  of  the  Board. 

Those  allowances  will  be  sufficient  to  relieve  the  dis- 
abled man  of  all  undue  anxiety  while  undergoing  train- 
ing. They  will  be  the  same  as  given  during  his  service. 


Demobilization  and  Unemployment     337 

except  when  the  compensation  for  disabilities  due  him 
under  the  War  Risk  Insurance  Act  exceeds  the  pay 
drawn  for  his  last  month's  service,  it,  and  not  the  pay, 
shall  be  given.  Whereas,  if  a  former  enlisted  man  has 
dependents,  50  per  cent  of  his  pay  or  allowance,  together 
with  what  the  government  had  been  adding  to  it,  will 
be  allotted  them  until  his  reeducation  is  completed  and 
he  is  placed  in  a  position. 

All  benefits  under  the  act  are  allowed  officers  as  well 
as  men.  Any  one  entitled  to  compensation  for  dis- 
abilities under  the  War  Risk  Insurance  Act  is  prima 
facie  entitled  to  receive  revocational  training,  the  only 
other  stipulation  of  the  law  being  that,  in  the  opinion 
of  the  Vocational  Board,  the  disabled  man  is  unable 
on  discharge  "to  carry  on  a  gainful  occupation,  to  re- 
sume his  former  occupation,  or  to  enter  upon  some  other 
occupation,  or  having  resumed  or  entered  upon  such 
occupation,  is  unable  to  continue  the  same  successfully 
..."  Thus  the  widest  possible  discretion  is  allowed. 

No  case  entitled  by  law  or  merit  should  be  or  will  be 
neglected. 

PRACTICALLY   NO   HOPELESS   CASES 

The  Board  has  unlimited  discretion  in  the  selection 
of  occupations  and  even  professions  in  which  to  offer 
these  disabled  men  reeducation.  It  may  employ  exist- 
ing institutions  or  establish  new  ones.  It  may  make 
arrangements  with  shops,  individuals,  or  any  other 
agency  for  giving  these  men  the  training  they  should 
have.  There  is  no  time  limit  or  expense  limit ;  the  allow- 
ance:- continue  and  all  expenses  are  borne  by  the  Govern- 
ment if  a  man  is  in  training  a  month  or  years. 


338  Reconstructing  America 

Wherever  practicable  and  industrially  advisable,  the 
men  will  be  urged  to  adopt  occupations  wherein  they  may 
make  use  of  such  experience  as  they  had  before  entering 
the  army. 

For  example,  two  men,  who  were  butchers  on  enlist- 
ment, each  lost  a  leg,  and  are  now  being  prepared  to 
become  meat  inspectors.  In  many  cases,  as  in  the  two 
mentioned,  the  men  will  become  fitted  for  higher  and 
better-paying  positions  in  the  line  of  work  they  followed 
before  going  to  war. 

A  former  dairy  worker  has  been  sent  to  an  agricultural 
college,  where  he  will  be  given  a  special  course  in  dairy 
farming,  so  that  hereafter  he  may  supervise  where  before 
he  only  labored.  A  negro  farmer,  no  longer  able  to 
follow  the  plow,  has  been  sent  to  Hampton  Institute, 
where  he  will  be  given  a  special  course  in  poultry 
raising. 

The  Federal  Board  of  Vocational  Education  has 
issued  a  pamphlet  giving  the  occupations  open  to  dis- 
abled men  of  every  type.  They  number  into  the 
hundreds  and  the  list  is  far  from  complete. 

There  are  practically  no  hopeless  cases,  except  those 
suffering  from  permanent  mental  derangement,  and  all 
of  those  are  not  hopeless. 

Dr.  Bourillon,  the  French  reeducationist,  declares : 
"It  would  be  rash  to  draw  up  a  limited  list  of  the  trades 
which  can  be  taught  to  the  mutilated,  for  often  an  in- 
genuity and  unsuspected  skill  allows  of  their  doing  work 
which  at  first  sight  seemed  to  be  impossible." 

It  is  the  duty  of  the  Board  to  aid  the  men  to  secure 
positions  after  training  is  completed.  In  this  part  of 
the  work  no  great  difficulty  is  expected,  for  the  leaders 


Demobilization  and  Unemployment    339 

of  industry,  or  organized  labor,  and  all  outside  agencies 
are  offering  every  reasonable  cooperation.  In  time,  of 
course,  these  men  will  be  subject  to  the  same  economic 
laws  that  affect  all  labor,  but  they  will  have  the  extra 
security  coming  from  the  fact  that  there  rarely  is  an 
over-supply  of  skilled  workers. 

The  policy  will  be  to  give  disabled  soldiers,  after  they 
leave  the  hospitals,  opportunity  for  reeducation  so  special- 
ized that  their  superior  training  will  enable  them  to 
successfully  compete  for  employment  in  occupations 
useful  and  paying,  in  spite  of  disabilities  caused  by 
injuries. 

ONE   PER   CENT   OF   ALL   SOLDIERS   NEED   REHABILITATION 

How  many  men  will  come  under  the  terms  of  the  law 
no  one  can  safely  estimate.  The  experience  of  Canada 
and  Great  Britain  up  to  last  spring  was  that  one  per 
cent  of  all  sent  to  the  front  would  need  rehabilitation 
along  vocational  lines,  and  can  be  greatly  aided  thereby. 

OVER-SEXTIMENTALIZING   INJURIOUS 

An  obstacle  in  the  way  of  the  complete  performance 
of  the  work  of  rehabilitation  is  the  tendency  to  over- 
sentimentalize  about  the  subject  in  question.  This 
tends  to  cause  some  who  are  disabled  to  unduly  estimate 
their  handicaps  and  to  become  fixed  in  the  belief  that 
they  face  hopeless  futures.  It  also  may  lead  some  into 
adopting  new  occupations  more  unique  than  practical, 
and  upon  which  they  cannot  safely  depend. 

The  public  may  take  a  very  important  part  in  this  work, 
and  it  can  begin  by  restraining  the  natural,  and  in  a 


340  Reconstructing  America 

way  admirable,  impulse  toward  sentimental  and  emo- 
tional excesses  in  dealing  with  the  disabled  soldier. 

The  public  should  be  further  warned  against  the  danger 
of  acquiring  a  warped  and  partially  false  perspective 
of  the  subjects  to  be  dealt  with  and  the  way  they  must 
be  dealt  with.  Popular  publications  have  circulated 
much  in  the  way  of  reading  matter  and  pictures  on  this 
question,  but  the  bulk  of  it  bears  on  those  phases  most 
appealing  to  the  imagination.  We  read  much  about 
what  is  done  for  "cripples,"  particularly  the  maimed 
and  the  blind.  No  one  would  withhold  an  item  of  praise 
or  encouragement  for  the  wonderful  things,  therapeu- 
tically  and  vocationally,  being  done  for  the  most  highly 
pathetic  types  of  the  disabled,  like  the  blind,  the  arm- 
less, or  the  legless.  Yet  we  should  not  forget  that 
they  constitute  a  very  small  proportion  of  all  those 
who  must  be  restored  physically  and  occupationally. 
Seventy-five  per  cent  or  more  of  the  total  are  disabled 
in  such  ways  as  are  not  visible  on  casual  observation. 
Of  all  the  Canadians  who  have  returned  from  the  war, 
fewer  than  fifty  are  blind. 

We  will  care  for  our  injured  soldiers,  and  will  broaden 
our  conception  of  national  responsibility  to  cooperate 
with  the  States  that  all  our  citizens  may  be  given  better 
opportunity  to  prepare  for  the  pleasures  and  burdens  of 
life. 

Ill 

THE  PROBLEM  OF  THE  DEMOBILIZED  WORKERS 

BY  SKNATOR  JOHN   WIXGATE  WEEKS 

Nearly  three  years  ago  conferences  were  held  by  the 
Allies  at  which  certain  general  principles  were  adopted 


Copyright   !>y    II.    H.    fierce,    I?., stun   ami    Ni-w   York. 

SKXATOR    JOHN    WINV.ATK    \\'KKKS 


Demobilization  and  Unemployment    341 

in  regard  to  trade  conditions  after  the  war,  the  relation- 
ship of  one  power  to  another,  the  relationship  of  the 
Allied  nations  to  friendly  countries,  neutral  nations,  and 
the  enemy  governments. 

Similar  conferences  were  held  by  the  Central  Powers. 
Quite  likely  the  conclusions  reached  at  that  time  may 
have  to  be  modified,  but  these  conferences  indicate  the 
tendency  of  the  other  nations  to  do  things  which  every 
one  must  recognize  as  absolutely  essential.  .  .  . 

The  United  States  is  remaining  absolutely  idle,  and 
unless  we  act  promptly,  we  shall  lose  a  great  part  of 
the  commercial  trade  advantages  we  have  obtained 
during  the  war,  and  we  will  have  much  confusion  which 
it  will  take  a  long  time  to  overcome. 

THE    SHIP    PROBLEM 

Let  us  take,  for  example,  our  shipping  interests.  At 
the  end  of  the  war  we  are  likely  to  have  a  merchant 
fleet  larger  than  that  of  any  country  in  the  world.  This 
fleet  will  be  very  largely  owned  by  the  Government. 

Are  we  going  to  sell  the  yards,  lease  them,  or  is  the 
Government  to  continue  operating  them?  It  may 
be  decided  to  be  best  to  abandon  those  least  advanta- 
geously located.  What  are  we  going  to  do  with  this 
enormous  American  tonnage? 

Our  trade  with  neutral  countries  has  been  greatly 
increased,  and  it  is  in  condition  to  be  developed  to  a 
much  greater  extent.  Before  the  war,  out  of  a  total 
production  of  some  six  billions  of  dollars  we  found  it 
necessary  to  secure  foreign  markets  for  something  like 
a  billion  of  our  products. 

The  entire  productive  capacity  of  the  country  has  been 


342  Reconstructing  America 

increased  enormously  since  the  beginning  of  the  war. 
If  it  is  to  be  operated  at  its  full  capacity,  especially  when 
the  demand  for  munitions  of  war  ceases,  the  United 
States  will  quite  likely  have  an  additional  productive 
capacity  of  from  25  to  50  per  cent. 

Markets  must  be  found  for  this  surplus  production, 
and  they  must  be  foreign  markets. 

LABOR   CONDITIONS 

What  are  we  going  to  do  with  all  the  manufacturing 
plants  and  other  establishments  created  for  war  pur- 
poses? What  are  we  going  to  do  with  the  millions  of 
war  workers  now  busily  employed,  and  who  will  find 
themselves  out  of  employment  at  once  when  peace  has 
been  declared?  .  .  .  ^  • 

The  evidence  would  indicate  that  the  savings  of  workers 
of  that  character  have  not  been  materially  greater  than 
in  normal  times.  If  that  is  true,  it  will  not  take  very 
long  to  dissipate  their  savings.  Without  assistance 
from  the  Government  it  will  take  a  long  time  for  them 
to  readjust  themselves  with  civil  employments.  There- 
fore we  should  prepare  to  meet  this  problem  and  develop 
a  definite  plan.  .  .  . 

FINDING   EMPLOYMENT 

If  any  plan  has  been  adopted  for  demobilization  of 
our  Army  and  Navy  after  the  war  it  has  not  been 
brought  to  my  attention.  What  is  to  be  done  with 
these  men,  and  how  are  we  going  to  aid  them  to  resume 
their  former  or  other  civil  employments? 

With  the  single  exception  of  a  statement  recently 
made  by  Secretary  Lane,  of  the  Interior  Department, 


Demobilization  and  Unemployment    343 

relative  to  occupancy  of  public  lands  by  soldiers  and 
sailors,  I  have  not  heard  of  even  any  tentative  schemes 
proposed  to  provide  for  this  exigency. 

Providing  employment  for  5,000,000  men  and  trans- 
ferring the  millions  of  war  workers  into  similar  employ- 
ments will  mean  vastly  increased  production.  It  is 
useless  to  provide  for  this  production  unless  we  make 
provision  for  its  disposition.  In  this  connection  the 
importance  and  necessity  of  securing  foreign  markets  is 
again  demonstrated.  If  that  is  not  done  our  surplus 
products  will  be  so  much  greater  than  our  demands  that 
it  will  not  be  profitable  to  produce. 

TRADE    EXPANSION   AND    CREDIT   FACILITIES 

When  peace  is  declared  there  will  be  in  process  of 
completion  billions  of  dollars  of  war  orders.  Neces- 
sarily most  of  those  orders  will  be  canceled  immediately. 
That  will  mean  that  manufacturers  will  have  under 
contract  large  quantities  of  raw  material.  The  prices 
of  such  materials  will  undoubtedly  decline  at  once. 

Who  is  going  to  be  responsible  for  the  losses  incident 
to  that  situation?  Unless  the  Government  saddles  it- 
self with  these  deficiencies  there  will  be  claims  aggre- 
gating billions  of  dollars,  and  we  will  have  uncertainty 
for  years  to  come,  and  probably  many  failures.  The 
credit  facilities  of  the  country  must  be  prepared  to  meet 
this  condition. 

FATE    OF    WOMEN    WORKERS 

Millions  of  women  are  now  doing  work  heretofore 
performed  by  men.  Are  they  to  return  to  their  former 
employments  or  unemployment,  or  are  they  to  continue 


344  Reconstructing  America 

their  present  pursuits  in  competition  with  the  millions 
returning  from  military  service  ? 

Would  it  be  well  for  us  to  provide  for  permanent 
employment  agencies  throughout  the  country,  and  not 
only  find  employment  for  those  seeking  it,  but  arrange 
for  the  transferal  of  unemployed  to  localities  where 
there  is  a  dearth  of  labor? 

UNJUST   PENSIONS 

Many  European  countries  and  other  nations  have 
taken  steps,  nationally,  relating  to  many  social  wel- 
fare questions ;  for  example,  like  providing  for  old-age 
pensions,  life  insurance,  and  other  similar  matters. 
Those  questions  are  being  agitated  in  the  United  States 
in  some  localities,  and  a  pensioning  system  has  been 
adopted  applying  to  a  limited  number  of  civil  employ- 
ments. 

It  is  being  done  in  a  desultory  and  probably  un- 
satisfactory and  unjust  way.  If  it  is  wise  to  do  it  at 
all,  it  should  be  wise  for  the  National  Government  to 
do  it. 

But  before  any  comprehensive  action  is  taken  the 
results  obtained  in  other  parts  of  the  world  should  be 
carefully  canvassed.  This  is  the  time  when  that  series 
of  questions  should  have  careful  consideration. 

If  the  surplus  output  of  products  is  likely  to  exist  — 
it  certainly  will  if  all  of  our  people  arc  employed  —  how 
are  we  to  develop  plans  to  secure  new  foreign  markets 
for  them,  and  are  our  credit  and  banking  facilities  suf- 
ficient to  finance  additional  foreign  markets  on  such  a 
large  scale?  With  our  large  shipping  interests  fully 
developed,  our  agencies  established  in  many  neutral 


Demobilization  and  Unemployment     345 

countries,  we  may  well  take  advantage  of  the  opportunity 
to  extend  these  markets. 


HOME   PRODUCTS 

Moreover,  a  careful  investigation  should  be  made  as 
to  the  possibility  of  manufacturing  articles  which  the 
United  States  has  purchased  abroad  in  the  past,  but 
which  can  be  produced  in  this  country. 

Every  encouragement  should  be  given  to  the  establish- 
ment of  such  industries,  either  through  protective  tariffs 
or  other  means,  so  that  as  far  as  it  is  possible  we  shall 
produce  the  things  which  we  actually  use. 

One  of  the  strongest  features  of  the  German  campaign 
is  the  fact  that  Germany  has  been  able  to  provide  most 
of  the  things  it  actually  required  during  a  time  when  its 
coast  has  been  blockaded. 

This  question  brings  us  to  the  question  of  trusts  and 
combinations.  Heretofore  the  German  Government 
has  been  an  active  participant  in  the  organization  of 
combinations  and  trusts.  It  has  not  only  encouraged 
them,  but  has  taken  a  financial  and  active  interest  in 
their  operations. 

If  we  may  judge  by  the  reports  of  the  various  British 
commissions,  and  the  conclusions  they  have  reached, 
Great  Britain  intends  to  out-German  Germany  in  this 
respect. 

MUST    MODIFY    POLICY 

Undoubtedly  we  are  going  to  modify  our  past  policy 
in  regard  to  large  combinations.  If  we  do  not  do  so, 
we  are  going  to  lose  our  present  advantageous  position 
in  world  competition. 


346  Reconstructing  America 

Just  as  an  example  of  the  views  entertained  by  the 
British  committee  on  commercial  and  industrial  policies 
after  the  war,  let  me  make  one  quotation  from  this  re- 
port. In  speaking  of  foreign  trade,  it  says : 

"In  all  probability  a  permanent  improvement  can 
only  be  obtained  from  better  organization  of  the  trades 
concerned,  but  those  interested  will  almost  certainly 
look  for  assistance  from  the  Government  in  a  variety 
of  ways,  and  questions  involving  tariffs  will  have  to  be 
considered  and  dealt  with." 

Great  Britain  talking  about  tariffs  ! 

"In  our  opinion  it  will  be  necessary  for  the  Govern- 
ment to  give  special  consideration  to  the  circumstances 
of  each  trade,  and  any  request  for  encouragement  and 
assistance  should  be  dealt  with  not  only  on  its  own 
merits,  but  in  relation  to  the  trade  of  the  country  as 
a  whole." 

TRADE    COMBINES 

We  have  by  legislation  permitted  American  industries 
to  combine  in  foreign-trade  operations.  Shall  we  or 
shall  we  not  permit  such  combinations  in  relation  to  our 
home  markets? 

We  may  also  find  it  desirable  to  consider  the  whole 
question  of  raw  materials  and  their  regulation.  If  I 
may  judge  by  the  sentiment  expressed  as  a  result  of 
foreign  investigations,  it  is  the  purpose  of  European 
countries,  as  far  as  may  be  practicable,  to  control  raw 
materials  produced  in  those  countries. 

Not  only  that,  but  it  is  the  intention  to  control  capital 
or  the  uses  made  of  capital  raised  in  the  home  country 
to  be  invested  in  foreign  countries.  A  very  pertinent 


Demobilization  and  Unemployment    347 

suggestion  in  this  respect  may  be  found  in  the  report 
already  quoted. 

"Amongst  other  recommendations  the  departmental 
committee  suggests  that  all  purchases  of  iron  or  steel 
made  by  or  for  the  Government,  public  bodies,  and 
railway  companies  within  the  United  Kingdom  should 
be  of  British  manufacture ;  that  the  raising  of  capital 
in  the  United  Kingdom  for  undertakings  abroad  should 
be  conditional  upon  the  purchase  of  as  much  of  the 
material  required  as  possible  in  this  country." 

Moreover,  the  committee  on  reconstruction  should 
look  with  great  care  into  the  war  expenditures,  and 
should  make  recommendations  for  changes  and  econo- 
mies in  the  existing  systems.  Necessarily  in  time  of 
war  more  or  less  waste  and  extravagance  prevails.  When 
the  war  is  over  the  strictest  governmental  economy 
must  be  observed,  and  we  should  be  ready  to  at  once 
readjust  our  civil  government  system  to  a  peace  basis 
which  will  combine  economy  and  efficiency. 


CHAPTER  XVII 
WHERE  AMERICAN  EDUCATION  HAS  FAILED 

THE  thorough,  efficient  way  in  which  the  Govern- 
ment has  handled  the  problem  of  educating  the  soldier 
and  sailor  has  goaded  the  States  to  examine  into  their 
own  educational  systems.  California  took  the  initiative, 
and  her  committee  of  leading  educators,  appointed  to 
consider  the  reorganizing  of  the  State's  public  schools, 
has  already  made  its  report,  a  striking  feature  of  which 
is  that  the  State  shall  provide  all  individuals  both 
variety  of  educational  opportunity  and  necessary  conti- 
nuity of  education  reaching  through  all  gradations  of 
learning,  training,  and  research. 

The  following  articles  by  distinguished  educators 
emphasize  most  forcibly  the  immediate  need  of  edu- 
cational reform  in  the  United  States : 


DEFECTS  IN  AMERICAN  EDUCATION  REVEALED  BY  THE 

WAR 

BY  CHARLES  W.   ELIOT 

President  Emeritus  of  Harvard 

The  war  has  revealed  to  the  American  public  the 
unexpected  fact  that  there  is  a  considerable  amount  of 
illiteracy  in  the  population,  unevenly  distributed  among 
the  different  States,  but  disappointingly  large  on  the 


Where  American  Education  Has  Failed    349 

average  —  7.7  per  cent.  This  illiteracy  was  conspicuous 
in  the  army  and  navy,  which  the  Government  under- 
took to  recruit  rapidly  by  draft,  and  was  at  once  seen 
to  present  serious  obstacles  to  the  rapid  training  of 
effective  Government  forces.  The  public  promptly 
perceived  that  the  prevention  of  illiteracy  was  a  na- 
tional interest,  which  should  never  have  been  left  to 
the  States  without  any  supervision  by  the  National 
Government.  Although  the  existing  illiteracy  and  its 
consequences  were  brought  to  the  attention  of  the 
American  people  by  the  war,  the  whole  people  at  once 
saw  that  the  public  interest  in  the  prevention  of  illiteracy 
was  not  at  all  confined  to  war  times.  They  saw  that 
the  prevention  of  illiteracy  was  even  a  greater  object 
for  the  nation  as  a  whole  in  normal  peace  times  than  in 
abnormal  war  times ;  so  that  the  whole  people  is  now 
prepared  to  support,  and  indeed  to  urge,  whatever 
appropriations  Congress  may  think  necessary,  in  order 
that  the  National  Government  may  bring  effective 
aid  to  the  States  in  extinguishing  illiteracy. 

The  organization  and  training  of  the  national  army 
also  brought  clearly  into  view  the  fact  that  a  significant 
portion  of  the  young  men  liable  to  military  service 
were  not  acquainted  with  the  English  language,  and 
that  this  ignorance  made  it  more  difficult  to  produce 
promptly  an  effective  army  and  navy.  Private  per- 
sons and  private  incorporated  societies  had  already 
seen  that  this  ignorance  of  the  English  language  on  the 
part  of  alien  operatives  was  impairing  efficiency  and 
productiveness  in  various  American  industries,  and 
had  taken  some  measures  to  remedy  locally  this  evil. 
But  these  efforts  were  necessarily  limited  by  lack  of 


350  Reconstructing  America 

money  and  could  only  be  of  the  drop-in-the-bucket  sort. 
Here  again  we  discern  a  national  interest  and  an  urgent 
need  for  immediate  expenditures  on  the  part  of  the 
National  Government  in  aiding  all  State  and  municipal 
efforts  to  teach  English,  not  only  to  children  of  alien 
birth,  but  to  adults  as  well.  The  best  form  of  this 
aid  would  be  a  contribution  in  money  for  each  pupil 
that  has  completed  a  course  of  instruction  covering  a 
specified  number  of  lessons  and  passed  an  examination 
prescribed  by  the  National  Bureau  of  Education. 

ATTRACTIVENESS   OF   AMERICA 

It  is  the  attractiveness  of  the  country  as  a  whole  to 
various  alien  races  which  has  produced  this  difficulty 
in  the  American  army  and  navy  and  in  some  important 
American  industries ;  so  that  the  National  Govern- 
ment may  fairly  take  part  in  abating  it.  Whether 
this  new  function  of  the  Government  will  become  perma- 
nent or  not  will  depend  on  the  renewal  of  immigration 
from  Asia  and  Southern  Europe. 

The  draft  also  revealed  the  prevalence  of  venereal 
disease  among  the  civil  population  of  the  United  States, 
both  urban  and  rural,  to  a  degree  which  has  appalled 
the  entire  people.  The  War  Department  and  the 
Navy  Department  at  once  set  to  work  to  treat  venereal 
diseases  within  the  army  and  navy  and  to  prevent  the 
spread  of  these  terribly  destructive  diseases  within  the 
military  and  naval  forces.  The  campaign  conducted 
by  both  departments  against  these  diseases  in  and 
about  the  barracks,  camps,  and  cantonments  of  soldiers 
and  sailors  at  home  and  abroad  has  had  a  prompt  and 
large  success.  To  maintain  and  develop  this  campaign 


Where  American  Education  Has  Failed    351 

against  these  highly  communicable  diseases  after  the 
war  ceases  will  require  large  appropriations  from  the 
National  Treasury  and  the  maintenance  of  a  con- 
siderable corps  of  public  health  officers  under  the  direc- 
tion of  the  Division  of  Venereal  Disease,  which  has 
already  been  created  in  the  Treasury  Department.  .  .  . 


WHAT  THE   WAR  HAS   TAUGHT  US 

The  war  has  brought  home  to  millions  of  young  men 
and  to  other  millions  of  their  relatives,  friends,  and 
acquaintances  that  in  the  new  kind  of  fighting,  by  means 
of  innumerable  applications  of  chemical  and  physical 
science,  the  soldier  or  the  sailor  needs  intelligence,  per- 
sonal initiative,  well-trained  senses,  and  some  skill  of 
eye,  ear,  or  hand.  All  the  belligerent  governments 
have  learned  this  lesson.  They  have  learned  that 
armies  and  navies  need  a  large  proportion  of  skilled 
workmen  in  the  field,  at  the  front  as  well  as  behind  the 
front.  They  have  learned  that  every  private  soldier 
or  sailor  needs  to  understand  orders,  to  remember 
them,  and  to  comprehend  the  plan  and  objects  of  a 
given  attack,  so  that  he  can  carry  out  the  orders  even 
if  no  officer  or  non-commissioned  officer  be  left  to  guide 
him.  If  then  a  nation  may  be  called  on  to  put  an  effec- 
tive army  into  the  field  at  short  notice,  its  schools  should 
have  given  constant  attention  to  the  training  of  the 
senses  and  the  memory  and  to  the  acquisition  of  skill. 
All  American  schools  must,  therefore,  add  to  their 
present  programs,  which  are  based  chiefly  on  literature 
and  mathematics,  instruction  in  the  sciences  of  observa- 
tion in  the  arts  and  crafts,  and  in  the  elements  of  music, 


352  Reconstructing  America 

drawing,  modeling,  and  architecture;  and  must  give 
all  pupils  practice  in  the  use  of  their  own  eyes,  ears, 
and  hands  in  productive  labor,  and  in  the  inductive 
method  of  reasoning. 

THE  AGRICULTURAL  ARTS 

The  war  has  also  placed  in  a  clear  light  the  need  all 
over  the  world  of  a  more  productive  agriculture,  and 
has  shown  how  that  need  may  be  satisfied  through 
giving  instruction  to  children  and  adults  in  the  means 
of  increasing  agricultural  productiveness  through  the 
study  of  soils,  seeds,  food  plants,  domestic  animals, 
and  the  best  means  of  cultivating  and  improving  the 
soil.  It  follows  that  the  teaching  of  agricultural  science 
and  art  should  be  an  important  feature  in  the  education 
of  every  child  in  both  the  urban  and  the  rural  popula- 
tion. Fortunately,  the  agricultural  arts  afford  admirable 
means  of  training  children  and  adults  to  accurate 
seeing  and  recording  and  then  to  sound  reasoning  on 
the  records  made. 

The  war  has  made  plain  to  multitudes  of  people  what 
was  known  before  to  a  few,  that  human  testimony  is 
as  a  rule  untrustworthy,  not  because  the  witnesses 
intended  to  deceive  but  because  they  were  unable  to 
see,  hear,  or  describe  correctly  what  happened  in  their 
presence.  This  inability  to  see,  hear,  touch,  and 
describe  accurately  is  by  no  means  confined  to  ignorant 
or  uneducated  people.  Many  highly  educated  Ameri- 
can professional  men  have  never  received  any  scientific 
training,  have  never  used  any  instrument  of  precision, 
possess  no  manual  skill  whatever,  and  cannot  draw, 
sing,  or  play  upon  a  musical  instrument.  Their  entire 


Where  American  Education  Has  Failed    353 

education  dwelt  in  the  region  of  language,  literature, 
philosophy,  and  history.  Their  habits  of  thought 
permit  vagueness,  obscurity,  and  inaccuracy,  and  their 
spoken  or  written  statements  have  these  same  defects. 

GREAT  EDUCATIONAL  CHANGES  NECESSARY 

These  facts  suggest  strongly  the  urgent  need  of  modify- 
ing profoundly  the  programs  of  American  elementary 
and  secondary  schools.  They  must  no  longer  cling 
almost  exclusively  to  languages  and  literature  and  the 
elements  of  mathematics.  They  must  give  a  consider- 
able part  of  school  time  to  the  sciences  and  arts,  and 
to  the  acquisition  by  every  pupil  of  some  skill  of  eye 
or  hand  or  both,  and  at  the  same  time  must  increase 
rather  than  diminish  the  amount  of  training  they  give 
in  memorizing  to  hold,  in  discrimination  between  the 
true  and  the  false,  the  good  and  the  bad,  in  the  selection 
of  premises,  and  in  sound  reasoning. 

In  order  to  introduce  the  new  subjects  and  the  new 
methods  into  the  existing  schools  of  the  United  States 
it  would  be  necessary  to  reduce  somewhat  the  number 
of  periods  assigned  to  the  memory  subjects  and  to 
mathematics,  and  also  to  utilize  more  hours  in  the 
school  day  and  reduce  the  long  summer  vacation.  The 
new  subjects  and  methods  require  a  good  deal  of  bodily 
as  well  as  mental  exertion,  so  that  they  can  be  added  to 
the  school  program  without  risking  the  health  of  the 
children,  provided  that  all  schoolrooms,  including  shops 
and  laboratories,  be  well  ventilated.  Moreover,  much 
of  the  instruction  in  geography  and  agriculture  can 
be  given  out  of  doors,  the  teachers  taking  part  in  the 
necessary  excursions. 


354  Reconstructing  America 

It  is  an  essential  part  of  the  new  methods  of  instruc- 
tion that  the  pupils  should  be  stimulated  to  hard  work 
in  every  subject,  including  the  literary  ones,  by  interest- 
ing them  in  doing  things  themselves  rather  than  by 
reading  about  objects  or  events  or  being  told  about 
them.  All  teaching  should  be  as  concrete  as  possible, 
and  every  subject,  including,  of  course,  the  literary 
and  historical  subjects,  should  be  illustrated  by  the 
study  of  personages,  places,  charts,  diagrams,  and 
pictures.  It  is  indispensable  to  success  with  the  new 
subjects  that  the  pupils  should  use  their  own  eyes  and 
hands  and  themselves  describe  and  coordinate  their 
own  observations.  In  the  study  of  the  notes  and  records 
they  have  made  out  of  their  own  observations,  they  must 
apply  their  own  powers  of  memory,  discrimination, 
and  expression. 

ENGLISH   COMPOSITION 

Every  child  should  be  encouraged  and  induced  to 
acquire  the  habit  of  giving  an  account  to  the  teacher 
or  the  class  or  the  whole  school  of  anything  he  has 
read  or  seen  or  done.  An  excellent  way  to  teach  Eng- 
lish composition  is  to  provide  a  daily  exercise,  oral  or 
written,  or  both,  for  every  pupil  in  this  sort  of  descrip- 
tion, the  teacher  restricting  her  own  performance  to 
showing  the  pupil  where  he  or  she  has  failed  in  simplicity, 
directness,  or  accuracy  of  description.  It  is  important 
that  all  subjects  whenever  possible  be  taught  from  actual 
objects  to  be  accurately  observed  and  described  by 
the  pupils  themselves.  Pictures  or  drawings  of  objects 
will  not  answer  the  same  purpose.  It  should  also  be 
the  incessant  effort  of  the  teacher  to  relate  every  lesson 


Where  American  Education  Has  Failed    355 

to  something  in  the  life  of  the  child  so  that  he  may  see 
the  useful  applications  of  the  lesson,  and  how  it  concerns 
him.  Again,  much  time  may  be  saved  in  teaching  the 
familiar  as  well  as  the  new  subjects  in  the  existing  pro- 
grams by  teaching  groups  of  subjects  together  in  their 
natural  and  inevitable  relations.  For  example,  arithme- 
tic, algebra,  and  geometry  should  be  taught  together 
from  beginning  to  end,  each  subject  illustrating  and 
illuminating  the  other  two.  A  great  gain  in  the  time 
consumed  and  in  the  interest  of  the  pupils  will  be  made 
by  teaching  the  elements  of  government,  economics,  and 
sociology  together,  and  the  elements  of  history,  biog- 
raphy, geography,  and  travel  together.  So  in  the 
later  years  of  the  total  course  it  would  be  advantageous 
to  deal  with  chemistry,  physics,  biology,  and  geology 
because  these  subjects  are  generally  found  intimately 
associated  in  most  natural  processes  of  growth,  decay, 
creation,  or  extinction,  and  may  be  wisely  separated 
only  for  advanced  pupils  who  need  to  see  how  theories, 
guesses,  and  imaginings  have  proved  useful  guides  in 
experimentation  and  research.  The  wise  maker  of 
school  programs  will  henceforth  reduce  class  work  and 
the  size  of  classes,  and  increase  individual  work.  He 
will  also  discourage  uniformity  and  increase  variety 
in  the  instruction  given  to  the  utmost  limit  of  his  budget, 
and  will  make  as  frequent  as  possible  the  sortings, 
shiftings,  and  promotions  among  the  pupils.  The  worst 
thing  a  teacher  can  do  for  the  group  of  pupils  committed 
to  her  charge  is  to  try  to  keep  them  together  in  their 
attainments  or  their  progress,  holding  back  the  bright 
pupils  and  pushing  on  the  dull. 

It  is  obvious  that  it  will  cost  more  to  carry  into  effect 


356  Reconstructing  America 

the  new  methods  of  instruction  in  the  new  subjects 
than  the  American  public  have  been  accustomed  here- 
tofore to  spend  on  their  schools.  The  buildings  must 
be  more  carefully  heated  and  ventilated,  because  the 
pupils  are  to  spend  more  hours  a  day  in  them.  The 
equipment  of  the  laboratories  and  the  shops  required 
for  the  scientific  subjects  will  be  costly,  both  at  the  first 
outlay  and  in  the  maintenance.  The  supply  of  materials 
for  the  shops,  laboratories,  gardens,  and  greenhouses 
will  be  a  new  and  no  inconsiderable  charge  on  the 
annual  budget  of  the  schools.  And  a  new  sort  of  teacher 
will  be  required  —  a  teacher  better  trained  herself  in 
the  arts  and  sciences,  and  herself  brought  up  to  see, 
record,  remember,  and  describe  accurately.  .  .  . 

NECESSITY   FOR   PHYSICAL   TRAINING 

When  the  results  were  published  of  the  physical 
examinations  of  the  men  drafted  for  the  army  and 
navy,  the  whole  American  public  was  much  disappointed 
at  the  large  percentage  of  rejections.  Men  in  large 
numbers  proved  to  have  physical  defects  which  in- 
capacited  them  for  the  work  of  either  a  soldier  or  a 
sailor.  When  the  accepted  men  were  brought  together 
in  camp  a  large  proportion  of  them  seemed  deficient 
in  muscular  power,  and  the  majority  of  them  seemed 
never  to  have  been  trained  to  a  good  carriage  of  the 
body  or  a  vigorous  and  graceful  bearing.  It  took  weeks 
and  months  in  the  training  camps  to  produce  in  many 
of  the  recruits  an  adequate  muscular  development 
and  an  erect  carriage.  These  good  physical  qualities 
are  not  only  desirable  and  even  necessary  in  a  soldier 
or  a  sailor,  but  they  arc  equally  desirable  for  all  indus- 


/    Where  American  Education  Has  Failed    357 

trial  workers  and,  indeed,  for  the  entire  people.  If 
every  American  child,  boy  or  girl,  receives  an  adequate 
course  of  physical  training  while  at  school,  the  industrial 
efficiency  of  the  nation  will  be  greatly  increased  in 
the  normal  times  of  peace ;  and  if  war  came  again, 
the  necessary  military  training  would  be  made  shorter 
than  it  was  in  1917  and  1918,  because  it  could  assume 
that  a  good  training  of  the  muscles  and  a  thorough 
setting-up  drill  had  already  been  accomplished.  To 
secure  for  every  child  in  the  country  a  complete  course 
of  physical  training  is  a  great  national  object  for  war 
times  and  in  peace  times  alike,  and  such  a  course  should 
be  planned  and  enforced  by  national  authorities,  and 
part  of  the  expense  of  the  course  should  be  borne  by 
the  national  Government.  The  Swiss  Federal  Council 
prescribes  a  program  of  physical  training  for  every 
school  in  Switzerland,  and  appoints  and  pays  the  national 
inspectors  who  see  that  this  program  is  carried  out. 
The  Federation  also  makes  a  small  contribution  to  the 
cost  of  this  physical  training  throughout  the  republic. 
The  Congress  of  the  United  States  should  immediately 
provide  for  some  national  aid  to  the  States  and  munici- 
palities in  putting  into  force  in  all  schools  a  course  of 
physical  training  planned  and  watched  by  the  national 
Government.  When  a  proper  course  of  physical  train- 
ing has  been  in  operation  all  over  the  United  States 
for  ten  years,  the  productiveness  of  the  national  in- 
dustries will  show  a  great  increase.  .  .  . 

SOMETHING    ELSE    THE    WAR   BROUGHT   TO    LIGHT 

When  the  Pilgrim  Fathers  first  planted  their  settle- 
ment at  Plymouth  they  took  it  for  granted  that  every 


358  Reconstructing  America 

able-bodied  man  was  to  bear  arms  in  defense  of  the 
community.  The  Puritan  Colony  of  Massachusetts 
Bay  made  the  same  assumption;  and  both  these  pio- 
neering communities  relied  for  many  years  on  a  militia 
to  which  every  able-bodied  man  belonged  as  a  matter 
of  course.  In  the  adventurous  Puritan  settlements 
on  the  border,  the  men  carried  their  guns  with  them 
into  the  fields  where  they  worked  and  to  church  on 
Sundays.  Every  able-bodied  man  felt  that  he  might 
at  any  time  encounter  wounds  and  death  in  defense 
of  his  home  and  his  village.  Military  service  from 
him  was  the  country's  due. 

In  recent  American  generations  this  sense  of  personal 
individual  duty  to  the  country  has  been  lost;  and 
it  has  taken  a  great  war  in  defense  of  human  liberty 
to  reestablish  it.  Now,  it  is  for  the  schools  and  colleges 
of  the  country  to  maintain  this  sense  of  obligation  in 
all  the  generations  to  come  by  direct  and  positive  teach- 
ings and  by  cooperating  with  the  family  and  church 
in  training  boys  and  girls  and  young  men  and  women 
to  render  gladly  free,  unpaid  service  in  their  homes,  to 
the  neighbors  and  friends  whom  they  can  help,  and  to 
the  stranger  within  their  gates.  Every  secondary  school 
should  give  concrete  and  well-illustrated  instruction 
in  all  the  cooperative  enterprises  in  which  young  people 
can  take  part  for  the  benefit  of  the  community,  and  in 
all  the  protective  and  helpful  services  which  young 
citizens  can  render.  The  altruistic  sentiments  and 
services  should  be  set  before  the  pupils,  and  should 
be  exemplified  in  the  lives  of  their  teachers,  parents, 
and  natural  leaders.  The  influence  of  all  teachers 
and  parents  should  be  steadily  exerted  to  diminish  the 


Where  American  Education  Has  Failed    359 

selfishness  and  self-reference  which  often  accompany 
thoughtless  childhood,  and  to  develop  as  early  as  possible 
good-will  and  serviceableness  toward  others  and  consid- 
eration for  the  needs  of  others. 

VALUE   OF  COOPERATIVE  DISCIPLINE 

It  should  be  made  a  special  object  in  all  schools  to 
develop  among  the  children  and  youth  what  is  called 
in  sports  ''team  play";  to  impress  all  the  pupils  with 
the  high  value  of  cooperative  discipline,  that  is,  of  the 
discipline  imposed  with  the  consent  of  the  subjects 
of  discipline  in  order  to  increase  the  efficiency  of  the 
group,  and  therefore  the  satisfaction  of  every  member 
in  his  own  contribution.  This  content  in  a  strict 
discipline  which  he  has  a  share  in  planning  and  im- 
posing is  to-day  the  chief  need  of  all  workmen  in 
industries  which  require  punctuality,  order,  system, 
and  a  common  purpose  to  be  efficient  on  the  part  of 
all  concerned.  .  .  . 

In  modern  warfare  a  soldier's  work  in  an  active  army 
depends  for  its  success  chiefly  upon  the  soldier's  skill 
and  satisfaction  in  action  guided  and  determined  by 
strict,  cooperative  discipline.  The  same  is  true  in 
almost  all  the  large  national  industries.  Success  in 
them  involves  the  general  submission  of  all  participants 
to  a  strict,  cooperative  discipline.  This  discipline  does 
not  much  resemble  the  old-fashioned,  automatic,  un- 
thinking obedience,  which  was  long  the  ideal  in  military 
and  industrial  organization.  It  requires  the  voluntary 
cooperation  of  intelligent,  free  individuals  whose  wills 
consent  to  the  discipline  for  an  object  which  seems  good 
to  them  and  in  a  method  which  they  think  reasonable 


360  Reconstructing  America 

and  appropriate.  All  schools  and  colleges  should 
systematically  provide  much  practice  in  this  kind  of 
discipline. 

II 

EDUCATION  AFTER  THE  WAR 

BY  NICHOLAS  M.  BUTLER 

President  of  Columbia  University 

The  war  has  distinctly  helped  us.  It  has  killed  other 
things  than  human  beings,  and  it  has  burnt  up  other 
things  than  towns,  libraries,  and  churches.  It  has  laid 
to  rest  some  rather  widespread  illusions,  and  it  has 
burnt  up  many  sources  and  causes  of  intellectual,  moral, 
and  social  waste.  It  has  shortened  by  many  years, 
perhaps  by  a  generation,  the  path  of  progress  to  clearer, 
sounder,  and  more  constructive  thinking  as  to  education, 
its  processes,  and  its  aims,  than  that  which  has  occupied 
the  center  of  the  stage  for  some  dozen  years  past. 

We  have  been  living  in  an  era  of  reaction  that  has 
masqueraded  as  progress,  and  we  have  been  witnessing 
energetic  acts  of  destruction  whose  agents  sang  the 
songs  and  spoke  the  language  of  those  who  build.  Part 
of  what  we  have  been  living  through  and  putting  up 
with  as  best  we  could  has  been  due  to  a  false  psychology 
and  part  to  a  crude  economics.  The  moral  and  spiritual 
values  have  been  ground  between  the  upper  and  nether 
millstones  of  a  psychology  without  a  soul  and  an  eco- 
nomics with  no  vision  beyond  material  gain. 

According  to  this  newest  philosophy,  no  such  admi- 
rable virtue  as  thrift,  for  example,  could  be  taught,  but 
only  the  saving  of  ten-cent  pieces  or  of  dollar  bills,  or 


Where  American  Education  Has  Failed    361 

possibly  of  Liberty  Bonds,  as  separate  arts  or  vocations. 
Industry,  honesty,  loyalty,  charity,  and  truthfulness 
have  been  ingenuously  referred  to  as  vague  notions 
or  catchwords  that  are  very  apt  to  delude  the  unwary  - 
the  unwary  being  probably  the  unselfish.  A  sense  of 
humor  or  a  flash  of  common  sense,  had  either  been  pres- 
ent, might  have  saved  us  from  being  obliged  to  listen 
to  all  this  and  to  contemplate  the  ideal  world  as  made 
up  of  highly  competent  apple  polishers  and  pencil 
sharpeners  early  trained  to  their  engrossing  tasks,  and 
vocationally  guided  to  be  loyal  and  charitable  to  them- 
selves alone. 

WHAT  WAR  HAS   DONE 

**  What  a  sense  of  humor  or  a  flash  of  common  sense 
did  not  intervene  to  accomplish  the  war  has  done.  At 
a  critical  moment  for  the  history  of  education  in  the 
United  States  the  German  people  found  occasion  to 
reveal  themselves  to  an  astonished  world  as  the  apostles 
and  representatives  of  just  this  type  of  philosophy  of 
education  and  of  life.  Psychology  without  a  soul  has 
been  a  favorite  German  industry  for  a  long  time,  and 
organization  for  material  gain  has  been  the  ruling  thought 
of  the  German  people  for  quite  thirty  years.  On  this 
form  of  psychology  and  on  this  form  of  economics  as 
a  foundation  the  Germans  erected  their  superstructure 
of  military  autocracy,  of  insolent  aggression,  and  of 
lust  for  world  domination.  With  these  they  instantly 
challenged  the  rest  of  the  world  to  combat  for  its  mastery. 
For  months,  even  for  years,  the  issue  hung  uncertainly 
in  the  balance ;  but  at  last  the  nations  that  had  not 
surrendered  their  souls,  the  nations  that  had  not  cast 


362  Reconstructing  America 

aside  their  moral  and  spiritual  ideals  to  bow  down 
before  the  idol  of  material  gain,  the  nations  that  had 
not  put  efficiency  above  freedom,  brought  down  this 
proud  and  boasting  Teutonic  structure  in  the  dust. 
Nothing  in  history  that  aimed  so  high  has  ever  fallen 
so  low,  and  the  effect  upon  the  world's  education  ought 
to  be,  must  be,  instant  and  overwhelming.  We  ought 
now  to  be  spared,  at  least  for  a  time,  the  vexing  spectacle 
of  men  in  places  of  authority  in  education  and  in  letters 
who  spend  their  time  standing  in  front  of  the  convex 
mirror  of  egotism  thinking  that  what  they  see  reflected 
in  it  is  a  real  world  and  their  own  exact  relation  to  it. 

The  war  has  taught  the  lesson  that  the  proper  place 
of  efficiency  is  as  the  servant  of  a  moral  ideal,  and  that 
efficiency  apart  from  a  moral  ideal  is  an  evil  and  wicked 
instrument  which  in  the  end  can  accomplish  only  dis- 
aster. Belgium  and  Serbia,  measured  by  Teutonic 
standards,  were  inefficient ;  France  was  not  only  ineffi- 
cient but  decadent ;  Great  Britain  was  not  only  ineffi- 
cient but  on  the  point  of  disruption ;  and  America  was 
not  only  inefficient  but  hopelessly  given  over  to  pleasure 
and  to  gain.  True  it  is  that  no  one  of  these  nations 
had  kept  its  ideals  as  clear  and  as  sharply  denned  as 
it  should  have  done;  but  the  ideals  were  there  none 
the  less.  Therefore  it  was  that  when  the  attack  was 
made  these  ideals  sprang  from  their  hiding  places  and 
took  command  of  the  apparently  unorganized  and  ineffi- 
cient nations.  Meanwhile,  organized  efficiency,  immoral 
and  brutal,  was  hammering  at  their  doors.  The  free 
nations  held  the  enemy  until  their  ideals  could  call 
their  own  efficiency  and  power  of  organization  into  play 
as  servants,  and  when  that  had  been  accomplished  the 


Where  American  Education  Has  Failed    363 

end  was  in  sight.  That  end  has  now  come  with  a 
suddenness  and  a  completeness  that  no  one  would  have 
dared  foretell. 

ETHICS,   ECONOMICS,   POLITICS 

Regarding  man  in  his  capacity  as  a  self-directing 
individual,  there  are  three  fundamental  aspects  of 
civilization  that  have  continuing  and  permanent  signifi- 
cance. These  fundamental  aspects  are  ethics,  the 
doctrine  of  conduct  and  service ;  economics,  the  doctrine 
of  gainful  occupation ;  and  politics,  the  doctrine  of 
reconciliation  between  the  two  and  of  living  together 
hi  harmony  and  helpfulness. 

These  are  the  three  subjects  which  must  lie  at  the 
heart  of  an  effective  education  which  has  learned  the 
lessons  of  the  war.  Literature,  history,  and  philosophy 
will  continue  to  preside  over  them  all,  and  to  offer 
the  largest  and  most  inviting  opportunity  for  the  rarest 
and  best-furnished  spirits  unforgettably  to  serve  their 
kind.  One  Shakespeare,  one  Gibbon,  one  Aristotle, 
are  worth  a  thousand  years  of  human  waiting  and 
human  travail. 

The  doctrine  of  conduct  and  service  will  include  the 
study  of  both  personal  and  social  ideals,  as  well  as  the 
discipline  and  the  precepts  that  will  promote  their 
accomplishment.  The  doctrine  of  conduct  cannot  be 
one  of  selfishness,  of  greed,  or  of  exploitation  if  it  be 
constantly  combined  with  the  doctrine  of  service. 
Those  very  qualities  and  characteristics  which  we  have 
lately  been  told  cannot  be  inculcated,  such  as  loyalty, 
charity,  truthfulness,  are  to  be  unceasingly  enjoined, 
taught,  and  exemplified. 


364  Reconstructing  America 

The  doctrine  of  gainful  occupation  will  include  both 
the  means  and  the  end  of  activity  for  self-support  and 
self-dependence.  It  will,  when  a  stage  of  adequate 
maturity  is  reached,  add  to  the  general  knowledge  and 
general  discipline  of  the  individual  that  special  knowledge 
and  special  discipline  which  will  enable  him  to  relate 
himself  to  the  productive  activity  of  the  world  at  some 
specific  and  useful  point  in  some  definite  and  useful  way. 

The  doctrine  of  reconciliation  between  ethics  and 
economics  will  include  the  study  of  how  men  have 
attempted  to  find  ways  and  means  of  living  together  in 
harmony  and  helpfulness,  how  far  they  have  succeeded, 
in  what  respects  and  to  what  extent  they  have  failed, 
and  how  they  may  carry  forward  the  great  experiment 
in  their  own  time  to  still  more  fortunate  results  by 
making  ethics,  economics,  and  politics  not  three  dis- 
tinct and  mutually  exclusive  or  contradictory  disciplines, 
but  rather  three  aspects  of  one  and  the  same  discipline, 
which  is  that  of  human  life,  its  highest  achievement, 
and  its  ripest  fruit. 

The  care  and  protection  of  the  public  health  will 
hereafter  assume  new  importance.  Preventive  medi- 
cine, which  has  made  great  strides  in  recent  years, 
is  only  at  the  beginning  of  its  history.  The  physician 
and  the  nurse  will  shortly  be  looked  upon  as  educational 
factors  quite  as  important  as  the  teacher  himself.  Care 
for  the  public  health  will  not  content  itself  with  the 
mere  inspection  of  children  and  youth  in  school  and 
college,  or  with  the  care  and  cure  of  definite  disease.  It 
will  establish  a  relationship  between  home  conditions, 
school  conditions,  and  work  conditions.  It  will  have 
helpful  advice  to  give,  both  general  and  specific,  as 


Where  American  Education  Has  Failed    365 

to  diet  and  exercise,  and  it  will  insist  that  neither  at 
home,*in  school,  nor  at  work  shall  children  and  adoles- 
cent youth  be  subjected  to  conditions  that  impair  their 
bodies  as  well  as  starve  their  souls. 

TO   PREVENT  WASTED  EFFORT 

There  will  be  much  more  attention  paid  to  the  deter- 
mination of  individual  differences  of  taste  and  capacity, 
and  to  making  provision  for  them.  The  object  of 
this  determination  is  to  prevent  waste  of  effort,  the 
loss  of  opportunity,  and  the  blunting  of  talent  by  try- 
ing to  sharpen  it  upon  the  wrong  whetstone. 

We  have  succeeded  in  training  some  eminent  chem- 
ists, physicists,  and  biologists,  but  we  have  not  made 
chemistry,  physics,  and  biology  part  of  the  mental 
furniture  of  persons  who  are  called  educated,  largely 
because  we  have  insisted  upon  going  the  wrong  way 
about  it.  The  popular  American  textbooks  in  chemis- 
try and  in  physics  are  almost  without  exception  examples 
of  how  those  subjects  should  not  be  taught,  while  the 
popular  textbooks  in  biological  subjects  are  only  a  little 
better.  The  best  textbooks  in  geology  and  astronomy 
are  more  wisely  made.  The  teachers  of  all  these  sciences 
have  almost  uniformly  proceeded  as  if  every  student 
who  came  under  their  influence  was  to  become  a  specialist 
in  their  particular  science. 

Substantially  the  same  thing  may  be  said  about  in- 
struction in  foreign  language.  Greek  and  Latin  have 
been  in  large  degree  asphyxiated  by  wholly  wrong- 
headed  methods  of  teaching,  and  French  and  German 
are  a  sad  spectacle  to  look  upon.  Intelligent  youths 
who  have  spent  three,  four,  and  five  years  in  the  study 


366  Reconstructing  America 

of  one  or  both  of  these  languages  can  neither  speak 
them  easily  nor  understand  them  readily  nor  write 
them  correctly.  Here,  too,  as  in  the  case  of  the  natural 
sciences,  the  reason  is  to  be  found  hi  wrong  methods  of 
teaching.  It  is  a  sorry  commentary  as  to  what  is 
going  on  in  our  secondary  schools  and  colleges  in  this 
respect  to  learn  on  the  best  authority  that  there  are 
now  in  France  at  least  200,000  American  young  men, 
who,  after  six  months  of  military  activity  in  France 
and  three  or  four  hours  of  instruction  a  week  in  the 
French  language,  can  carry  on  a  comfortable  conversa- 
tion under  ordinary  conditions  and  circumstances  with 
the  mastery  of  a  vocabulary  of  at  least  a  thousand 
words.  On  the  other  hand  many  an  American  college 
graduate  who  has  studied  French  for  years  is  as  awk- 
ward and  as  nonplused  in  a  Paris  drawing  room  as  he 
would  be  in  the  driver's  seat  of  an  airplane. 

For  nearly  a  generation  past  American  education 
has  laid  the  greatest  emphasis  upon  the  study  of  the 
English  language  and  literature,  and  this  is  as  it  should 
be.  In  one  important  respect,  however,  damage  has 
been  and  is  being  done,  and  again  the  cause  is  to  be 
found  in  a  wrong  method  of  teaching.  The  idea  is 
prevalent  that  the  way  to  improve  the  written  English 
of  students  is  to  compel  them  to  write  constantly  and 
on  all  sorts  of  topics.  This  is  a  fallacy.  The  way  in 
which  to  teach  students  to  write  good  English  is  to 
teach  them  to  read  good  English. 

THE    ELEMENTARY   SCHOOL 

The  responsibilities  of  citizenship  increase  day  by 
day  and  have  been  multiplied  by  the  effects  and  results 


Where  American  Education  Has  Failed    367 

of  the  war.  There  is  double  need,  therefore,  of  train- 
ing the  youth  of  to-day  who  are  to  be  the  men  and 
women  of  to-morrow,  in  the  fundamental  principles 
of  good  citizenship  and  in  a  knowledge  of  those  rights, 
duties,  and  opportunities,  national  and  international, 
which  constitute  the  elements  of  the  world's  organized 
life.  How  many  members  of  Congress  there  may  be, 
what  their  terms  and  what  their  compensation,  are  facts 
of  slight  importance  compared  with  an  understanding 
of  the  reasons  for  the  existence  of  a  Congress,  of  its 
powers  and  duties,  and  of  the  ways  in  which  and  the 
purposes  for  which  its  functions  have  been  fulfilled  for 
140  years. 

The  elementary  school  must  be  brought  back  to  its 
proper  business,  neglect  of  which  has  been  general  and 
much  remarked  for  years  past.  The  elementary  school, 
being  well  organized  and  universal,  has  been  seized 
upon  by  faddists  and  enthusiasts  of  every  type  as  an 
instrumentality  not  for  better  education  but  for  accom- 
plishing their  own  particular  ends.  It  may  be  necessary 
one  of  these  days  to  organize  a  society  for  the  protection 
of  the  elementary  school  in  order  that  that  indispensable 
institution  may  have  an  opportunity  to  mind  its  own 
proper  business. 

Vigorous  steps  must  be  taken  promptly  to  make 
the  teaching  profession  more  attractive  to  men  of  high 
competence  and  ambition.  Not  only  must  the  wages 
of  teachers  be  very  greatly  increased,  but  the  prizes 
of  the  profession,  those  conspicuous,  influential,  and 
well-paid  posts  that  are  freely  open  to  talent,  must  be 
multiplied,  both  in  number  and  in  importance.  The 
ambitious  and  high-spirited  man  will  be  drawn  to  edu- 


368  Reconstructing  America 

cation  as  a  career  and  held  in  it  so  soon  as  he  finds  that 
it  offers  him  an  opportunity  for  reputation  and  for 
usefulness  that  is  commensurate  with  his  ambition 
and  his  capacity. 

One's  imagination  hesitates  to  attempt  to  measure 
the  capacity  of  one  hundred  millions  of  thoroughly 
well-educated,  well-trained,  and  well-disciplined  Ameri- 
can men  and  women.  Yet  nothing  short  of  this  should 
be  the  aim  of  American  educational  policy.  That 
policy  will  succeed  if  it  remains  steadfast  in  its  republi- 
can faith  and  if  it  continues  to  prefer  the  solid  founda- 
tion and  noble  ideals  of  the  old  republic  to  the  endowed 
and  prolix  fatuities  of  the  new  republic. 


CHAPTER  XVIII 
MILITARY  TRAINING  AND  PREPAREDNESS 


Is  A  PERMANENT  MILITARY  MACHINE  NECESSARY  — 
OR  COMPATIBLE  WITH  DEMOCRACY? 

BY  SENATOR  GEORGE   EARL  CHAMBERLAIN 

NATIONS  are  only  the  composite  reflection  of  human 
beings.  They  cannot  be  much  if  any  superior  to  the 
individuals  that  animate  and  give  them  life.  And  na- 
tions will  not  approach  perfection  in  thought  or  action 
until  at  least  a  majority  of  human  beings  in  all  nations 
are  perfect.  It  is  idle  to  imagine  all  the  imperfections 
of  human  nature  being  uprooted  or  destroyed  during 
war,  no  matter  how  long  or  violent  it  may  be.  In  fact, 
if  war  were  capable  of  such  a  phenomenal  purifying 
process,  we  would  be  compelled  to  exalt  the  science  of 
killing  above  the  tenets  of  religion  and  all  the  other 
moral  forces  that  have  worked  peacefully  for  the  uplift 
of  mankind.  For  myself,  I  can  pay  to  wrar  no  such 
tribute. 

Until  you  can  eradicate  from  the  individual  human 
heart  the  evils  of  greed  and  selfishness  and  the  desire 
to  get  something  that  belongs  to  some  one  else,  you  can- 
not eradicate  from  the  hearts  of  nations  the  same  desire 
that  lurks  in  the  hearts  of  men  in  dealing  with  others. 

So  long  as  men  are  greedy  nations  will  be  greedy. 
So  long  as  men  are  unjust  nations  will  be  unjust.  So 


370  Reconstructing  America 

long  as  men  seek  what  is  not  theirs  nations  will  hunger 
for  conquests.  .  .  . 

Thus  if  I  am  asked  if  we  will  have  to  adopt  measures 
of  permanent  military  preparedness  my  answer  is  posi- 
tively in  the  affirmative. 

OUR  AFTER   THE   WAR  MILITARY   ESTABLISHMENT 

But  if  I  am  asked  whether  we  shall  have  to  maintain  a 
large  standing  army  of  professional  fighters  or  adopt  any 
measures  partaking  inherently  of  militarism,  or  measures 
differing  essentially  from  the  policies  of  the  nation  as 
fixed  by  its  founders,  my  answer  must  be  a  positive 
negative. 

That  we  shall  have  to  have  an  army  as  we  shall  have 
to  have  a  navy  there  isn't  the  slightest  doubt  in  my  mind. 
But  I  do  not  believe  we  shall  need  to  maintain  a  much, 
if  any,  larger  standing  army  than  we  had  before  the  war. 
This  does  not  mean  that  we  will  not  have  to  keep  better 
prepared  for  war ;  for  in  reality  we  were  scarcely  pre- 
pared for  war  at  all. 

The  preparedness  for  war  we  shall  have  to  undertake 
in  future  will  bear  little  comparison  with  the  futile 
undertakings  along  that  line  in  years  past.  For  we 
have  learned  by  bitter  experience  that  modern  warfare 
is  no  simple  science.  War  was  formerly  a  matter  of 
human  combat ;  to-day  it  is  one  of  absolute  destruction, 
not  only  of  men  but  of  everything  within  its  zone  of 
action. 

It  may  be  argued  that  the  employment  of  such  fear- 
fully destructive  instruments  as  are  now  being  used  will 
in  future  be  prevented.  Such  can  be  done  only  by  pre- 
venting war  itself.  We  have  seen  what  happened  to 


Military  Training  and  Preparedness     371 

prior  agreements  entered  into  with  all  solemnity  regard- 
ing the  conduct  of  so-called  civilized  warfare.  Our 
very  participation  in  the  struggle  illustrates  the  flimsy 
texture  of  such  arrangements.  No  war  in  all  time  was 
preceded  by  fuller  or  more  humane  understandings  for 
the  observance  of  measures  of  amelioration.  And  in 
none  other,  since  savage  hordes  overran  countries  only 
to  satisfy  primordial  lust  for  destruction,  has  the  harsh- 
ne,ss  of  conflict  been  softened  by  fewer  measures  of  amel- 
ioration. Even  those  gallantries  and  courtesies  which 
the  customs  of  centuries  were  believed  to  have  rendered 
sacred,  such  as  are  covered  by  the  white  flag  of  truce, 
like  the  burying  of  the  dead  and  the  gathering  up  of  the 
wounded,  have  been  utterly  ignored. 

By  what  reason  can  we  assume  that  prior  agreements 
and  understandings  as  to  the  conduct  of  warfare  in 
future  can  be  trusted  absolutely  ?  And  if  not  as  to  the 
conduct  of  warfare,  how  can  we  trust  implicitly  to  those 
aiming  at  ending  warfare  itself  ? 

We  can  only  assume  that  agreements  and  arrange- 
ments will  be  trustworthy  largely  in  degree  that  there 
exist  adequate  measures  for  enforcing  them. 

GREAT    NUMBERS    OF    FUTURE    POTENTIAL    FIGHTERS 
NECESSARY 

Those  measures  must  consist  of  something  more  than 
an  adequate  supply  of  men  willing,  on  need,  to  fight. 
Though  armament  figures  in  warfare  as  it  never  did 
before,  the  importance  of  the  man  was  never  before  so 
great. 

War  is  and  will  continue  to  be  essentially  a  matter  of 
men.  Whatever  we  do  to  safeguard  the  future  must 


372  Reconstructing  America 

be  predicated  on  men,  not  on  great  numbers  of  men 
who  are  potential  fighters,  but  on  great  numbers  of  men 
already  trained  and  schooled  in  the  fighting  art. 

Hence  our  future  policies  of  preparedness  must  be 
laid  on  the  foundation  of  obligatory  military  service 
energized  and  applied  by  universal  military  training. 

It  is  the  only  way  we  can  avoid  maintaining  a  large 
standing  or  professional  army  and  perhaps  the  only  way 
we  can  safely  avoid  the  evils  of  militarism. 

Universal  military  training  does  not  mean  or  threaten 
the  danger  of  militarism,  which,  conversely,  does  not 
mean  preparedness.  Some  of  the  most  militaristic  of 
nations  have  proved  on  test  ill  prepared  for  war.  .  .  . 

While  militarism,  that  is,  the  complete  subjection  of 
civil  organization  to  the  military,  may  encourage  war, 
the  lesson  of  history  is  that  true  preparedness  tends  to 
discourage  and  prevent  war. 

Who  would  assert  there  is  any  touch  of  militarism  in 
the  ultra-democratic  government  of  Switzerland?  And 
that  oldest  of  republics  has  maintained  its  neutrality  in 
the  present  war,  as  has  been  clearly  proven,  through 
its  splendid  state  of  preparedness  based  on  the  principle 
of  obligatory  military  service  and  the  long  practice  of 
universal  military  training. 

Likewise  no  one  ever  thinks  of  the  governments  of 
Australia  or  New  Zealand  being  militaristic,  though  both 
employ  universal  military  training. 

MILITARY   TRAINING   NOT   CONTRARY   TO   DEMOCRACY 

The  practice  of  the  afore-mentioned  almost  model 
democracies  amply  shows  that  there  is  nothing  con- 
tradicting democracy,  or  threatening  its  tenets,  in  the 


Military  Training  and  Preparedness     373 

principle  that  every  man,  rather  than  a  selected  and  pre- 
ferred few,  should  bear  equally  the  obligation  of  fight- 
ing, when  necessary  for  one's  country,  or  in  expecting 
every  man  to  be  prepared  to  take  part  in  the  country's 
defense. 

Those  who  assert  that  the  principle  of  universal 
service  and  universal  military  training  controvert  the 
peculiar  ideals  and  traditions  of  our  own  nation  are  little 
informed  on  the  advocacies  of  the  founders  of  the  nation 
or  the  policies  actually  enacted  into  law  by  them. 

You  can  find  among  the  state  papers  at  Washington 
a  copy  of  a  report  made  by  our  first  Secretary  of  War 
to  our  first  President  urging  the  adoption  of  universal 
military  training  as  a  national  policy.  That  Secretary 
was  General  Henry  Knox,  one  of  Washington's  generals 
in  the  Revolution,  and  the  President  was  George 
Washington,  who  submitted  the  report  with  an  approval 
of  its  recommendations  to  the  Senate  of  the  United 
States. 

It  is  interesting  to  note  that  General  Knox's  plan  for 
amassing  and  training,  in  peace  times,  the  fighting  forces 
of  the  country,  was  practically  the  same  as  the  one  we 
have  followed  in  the  present  war.  In  some  respects, 
the  Knox  plan  was  more  radical.  It  called  for  the  en- 
rollment of  all  men  between  18  and  60  years  old.  Mili- 
tary training  was  to  begin  at  18  years,  and,  in  the  cases 
of  actual  mariners  and  seamen,  at  16  years.  Those  be- 
tween 18  and  21  were  to  be  the  "advance  corps"  of 
the  forces  and  subject  to  first  call  in  case  of  war.  Those 
between  21  and  45  were  to  be  the  "main  corps,''  while 
those  between  45  and  60  alone  were  to  be  classed  as  a 
"reserve  corps."  The  plan  called  not  only  for  enroll- 


374  Reconstructing  America 

ment  and  muster  but  also  for  annual  periods  of  training, 
the  length  of  which  shortened  as  the  men  grew  older. 

OUR  STATESMEN  OF  THE  PAST  FAVORED  MILITARY  TRAINING 

The  views  of  Washington,  Madison,  Hamilton,  and 
even  Jefferson,  favoring  what  amounted  to  universal 
military  training,  are  so  well  known  that  they  need  not 
be  quoted  here. 

But  the  question  as  to  national  policy  has  been  settled 
by  the  exigencies  of  the  present  war ;  yet  it  is  pleasing  to 
know  that  it  has  not  been  settled  contrary  to  the  prin- 
ciples accepted  and  at  least  nominally  applied  during  the 
formative  period  of  the  nation's  career. 

If  a  military  arm  will  still  be  needed  —  and  of  that  I 
don't  think  any  reasonable  man  has  any  doubt  —  we 
are  going  to  provide  for  it  as  we  have  made  up  our  armies 
now  in  the  field  by  requiring  every  man  to  do  his  part. 
Universal  military  training  will  obviate  the  necessity  for 
a  large  standing  army  and  its  consequent  threat  of 
militarism. 

By  giving  our  boys  on  or  before  their  reaching  18  or 
19  years  old  six  to  nine  months'  intensive  military  train- 
ing, thus  turning  out  annually,  without  interfering  with 
the  normal  operations  of  peace  times,  a  half  million  or 
more  men  prepared  for  service,  it  will  be  necessary  to 
maintain  only  enough  standing  troops  to  garrison  our 
foreign  possessions,  man  our  fortifications,  and  preserve 
our  arms.  In  my  opinion  a  standing  army  of  75,000 
may  be  sufficient. 

As  for  the  details  of  applying  universal  military  train- 
ing, there  can  be  no  difference  of  opinion  and  I  am 
wedded  to  no  particular  plan  or  plans.  The  scheme  can 


Military  Training  and  Preparedness     375 

be  adjusted  to  our  educational  methods,  as  most  of  the 
colleges  already  are  adjusting  it,  so  that  training  can  be 
made  concurrent  with  schooling. 

However,  the  training  must  be  under  the  sole  direc- 
tion of  the  Federal  government. 

STATE   MILITIA   NECESSARY   FOR  POLICE   PURPOSES 

The  State  militia  or  national  guard  should  as  far  as 
possible  be  separated  from  the  national  military  es- 
tablishment. In  my  opinion  the  national  government 
should  withdraw  support  given  State  troops,  of  course 
allowing  the  States  the  right,  as  they  have  under  the 
Constitution,  to  maintain  organized  militia,  for  con- 
stabulary or  supplementary  police  purposes. 

That  universal  military  training  will  be  well  worth 
while,  though  no  other  war  shall  ever  occur,  is  proven 
by  facts  coming  out  of  our  recent  experiences. 

Only  two  years  ago,  in  a  letter  to  a  member  of  Con- 
gress, Samuel  Gompers,  President  of  the  American  Fed- 
eration of  Labor,  wrote : 

"There  are  many  indications  that  there  has  been  a  decrease 
in  the  virility  of  our  nation  during  the  past  decade.  Whatever 
the  cause  of  this  decrease  in  the  physical  power  and  resistance, 
it  is  a  matter  of  grave  concern  to  all. 

"Agencies  that  will  build  up  our  citizens  physically  must  be  a 
part  of  our  social  organization.  Nor  is  this  of  concern  from  the 
military  standpoint  alone  or  purely  as  a  problem  of  national  de- 
fense. The  effects  of  better  health  and  increased  vigor  among  our 
citizens  will  be  plainly  shown  in  increased  efficiency  in  all  activi- 
ties of  life." 

Similar  statements  have  been  made  by  many  others 
equally  as  authoritative  as  Mr.  Gompers. 


376  Reconstructing  America 

That  adequate  military  training  will  check  the  ten- 
dency toward  decreased  virility  is  now  not  only  claimed 
but  proven  by  actual  experience. 

THE   EFFECT  OF   TRAINING   UPON  OUR  YOUNG   MEN 

It  may  astonish  many  people  to  learn  that  400  out 
of  every  1000  of  the  millions  of  men  who  have  been 
examined  for  the  army  were  found  to  be  suffering  from 
some  preventable  disease,  which  was  sapping  constitu- 
tions, threatening  general  health,  and  worse  still,  carry- 
ing a  most  baneful  foreboding  to  posterity.  Such  as 
were  taken  into  the  army  have  largely  been  cured,  and 
the  outcropping  of  such  diseases  —  once  the  scourge  of 
armies  —  has  been,  through  wise  measures  of  education, 
control,  and  attention,  reduced  to  almost  negligibility. 

The  value  to  the  youth  of  the  country  and  to  posterity 
which  universal  military  training  would  be  in  that  one 
direction  would  be  worth  the  cost,  particularly  so  if 
registrants  were  required  to  assemble  and  be  reexamined 
annually. 

What  it  may  accomplish  in  the  way  of  generally  im- 
proved health  is  shown  by  the  health  figures  of  our 
present  camps  and  cantonments.  Disease  has  been 
reduced  far  below  the  normal  for  civil  life  and  the  death 
rate  from  disease  likewise  has  been  cut  into  something 
like  one-half  for  men  of  the  ages  of  those  in  the  service. 

Not  long  ago  General  John  J.  Pershing  said  : 

"It  would  be  difficult  to  imagine  any  discipline  that  would 
be  of  greater  value,  not  only  to  the  individual  but  also  to  the 
industrial,  political,  and  military  future  of  this  country,  than 
to  provide  for  the  1,000,000  men  reaching  18  years  of  age  each 
year  five  or  six  months  consecutive  military  training,  under  such 


Military  Training  and  Preparedness     377 

intensive  system  as  that  followed  in  the  conduct  of  our  summer 
encampments  for  citizens.  .  .  . 

"Every  one  should  know,  except  those  who  will  not  see,  that 
the  surest  way  to  avoid  militarism,  if  such  a  thing  were  at  all 
possible  under  our  democratic  institutions,  is  to  give  every  man 
military  training. 

"With  military  training  every  young  man  would  learn  that  he 
owes  his  country  the  duty  of  preparing  himself  to  defend  her 
rights  if  called  on  to  do  so.  The  instruction  would  strongly 
impress  upon  him  his  military  obligation  to  the  government. 
Service  for  one's  country  cannot  be  measured  by  the  mercenary 
standard  of  wages,  but  it  ought  to  be  given  and  accepted  as  the 
antecedent  price  of  suffrage  and  for  the  mutual  benefit  of  both 
the  government  and  the  citizen." 

Under  the  stress  and  impetus  of  work  our  country  has 
made  many  great  forward  steps.  Let  us  take  care  to 
see  that  the  conclusion  of  war  be  made  no  excuse  for 
steps  backward. 

II 

COLLEGES  SHOULD  CONTINUE  MILITARY  TRAINING 

BY  ELMER    ELLSWORTH   BROWN 

Chancellor  oj  Xew  York  University 

When  the  universities  and  colleges  of  America  go 
back  to  a  complete  peace  basis  they  will  owe  it  to  their 
country  and  to  themselves  to  see  that  the  experience 
gained  in  war  shall  be  made  fruitful. 

It  was  a  remarkable  piece  of  good  fortune  that 
America  was  able  to  send  effective  officers  to  the  front 
in  the  campaign  in  France.  Had  there  been  any  defi- 
ciency in  this  respect,  the  extraordinary  success  at- 
tained in  quickly  adapting  an  army  composed  chiefly 


378  Reconstructing  America 

of  raw  troops  to  the  task  of  driving  ahead  in  an  arduous 
campaign  side  by  side  with  European  veterans  of  four 
years  and  against  such  veterans  would  have  been  im- 
possible. We  all  know  that  this  result  was  reached 
in  the  main  by  taking  men  of  collegiate  training  and 
rushing  them  through  an  intensive  course  of  military 
instruction  at  camps  under  the  guidance  of  officers  of 
the  regular  army,  supplemented  by  instruction  supplied 
by  allied  officers  who  had  been  through  the  ordeals  and 
perplexities  of  actual  warfare. 

We  must  exercise  foresight  as  regards  any  possible 
future  situations  of  this  kind.  It  would  be  a  national 
service  to  provide  a  moderate  amount  of  compulsory 
military  training  in  universities,  colleges,  and  technical 
schools.  In  New  York  University  we  are  considering 
the  introduction  of  the  Reserve  Officers'  Training  Corps, 
to  succeed  the  S.  A.  T.  C.,  with  a  fair  probability  that  such 
a  corps  will  be  organized  at  University  Heights.  It  is 
a  question,  however,  whether  such  a  corps  can  be  made 
successful  in  time  of  peace,  unless  membership  be  made 
compulsory,  as  in  the  military  units  of  the  land  grant 
colleges.  With  us,  any  arrangement  of  this  kind  will 
be  the  natural  complement  of  the  Slater  law,  in  the 
State  of  New  York,  which  makes  such  training  obligatory 
for  boys  up  to  and  including  18  years  of  age. 

VALUE   OF   THE   TRAINING 

The  value  of  this  training  as  given  in  State  universi- 
ties and  agricultural  and  mechanical  colleges  since  the 
Civil  War  has  been  emphasized  so  that  none  can  mistake 
it.  Of  the  officers  now  in  service,  a  good  proportion  is 
composed  of  graduates  of  these  schools,  who  had  had 


Military  Training  and  Preparedness     379 

two  years  or  more  of  military  training  while  pursuing 
their  studies. 

Their  training  has  been  good  for  them  in  many  ways. 
It  has  set  them  up  physically,  has  given  them  command 
of  themselves,  and  has  implanted  the  idea  of  military 
discipline. 

The  Students'  Army  Training  Corps  system  has  left 
with  us  a  certain  inspiration.  It  has  emphasized  es- 
pecially two  things :  first,  a  sense  of  rigorous  discipline ; 
and,  secondly,  an  ideal  of  service  to  the  country,  even 
to  the  sacrifice  of  life,  the  sense  that  no  man  liveth  to 
himself. 

DISCIPLINE    THE   VITAL   GAIN 

The  mechanics  of  military  drill  have  been  only  a 
small  part  of  the  national  benefit  which  we  have  gained 
from  this  system.  The  vital  gain,  it  seems  to  me,  is 
in  the  discipline  of  character,  which  underlies  all  else. 

What  we  had  under  the  Students'  Army  Training 
Corps  system  was  not  an  academic  life  with  a  military 
element  added,  but  military  life  with  academic  elements 
added.  When  we  return  to  the  normal  situation  in  the 
universities  and  colleges,  academic  life  will  be  the  prin- 
cipal thing,  with  military  life  incidental. 

In  the  next  few  years,  while  the  affairs  of  the  world 
are  gradually  settling  themselves,  it  is  obvious  that 
military  training  will  be  of  serious  value.  If  we  come 
to  permanent  peace  later  it  must  be  a  regulated  peace, 
and  there  will  still  be  a  certain  use  for  armies  and 
navies.  .  .  . 

In  looking  forward  to  providing  officers  for  such  an 
army,  wo  must  bear  in  mind  that  West  Point  can  supply 


380  Reconstructing  America 

only  a  leaven  for  the  mass  of  them.  The  others  must 
come  from  our  universities,  colleges,  and  technical 
schools,  and  they  must  be  able  to  meet  the  rigorous  scien- 
tific requirements  of  modern  war  as  we  have  seen  them 
exemplified  in  the  last  four  years  and  more. 

Writing  on  the  same  subject,  Harvard's  President, 
A.  Lawrence  Lowell/xsays  that  the  results  shown  by  the 
Students'  Army  Training  Corps,  "defective  and  incom- 
plete as  that  experiment  has  been,  seem  to  confirm  the 
opinion  that  drill  had  better  be  separated  from  aca- 
demic study  and  taught  in  summer  camps. 

"Moreover,  the  war  has  shown  the  need  of  a  broader 
preparation  for  modern  war  than  most  of  our  officers 
received.  There  seems  to  be  no  doubt  that  our  losses 
in  battle  were  much  larger  than  they  need  have  been  if 
the  officers  had  been  more  familiar  with  the  conditions 
they  were  called  upon  to  meet. 

"A  similar  plan  might  be  adopted  for  the  navy,  the 
students  being  taught  the  necessary  mathematics,  phys- 
ics, astronomy,  and  navigation  in  college  and  learning 
the  seamanship  and  drill  during  the  summer  at  naval 
stations  and  afloat.  So  long  as  there  is  no  universal 
compulsory  service,  military  studies  at  most  of  the 
colleges  must  be  voluntary,  but  the  summer  camps 
would  present  strong  attractions  to  the  students  and 
might  go  far  to  solve  the  problem  of  long  vacations 
spent  by  far  too  many  men." 


Military  Training  and  Preparedness     381 

III 

MILITARY   PREPAREDNESS   THE  BEST   GUARANTEE   OF 

PEACE 

BY  EX-SENATOR  GEORGE  SUTHERLAND 
Of  Utah 

We  have  been  in  the  habit  of  expressing  our  hopes 
by  saying  that  this  was  a  war  to  end  war ;  and  there  are 
some  who  have  convinced  themselves  that,  it  having 
been  won  by  the  Allied  nations,  the  world  will  enter 
upon  an  era  of  everlasting  peace.  The  causes  of  war 
among  nations  and  peoples  lie  very  deep  in  the  nature 
of  mankind  —  far  deeper  than  arguments  or  land  hunger 
or  kings  or  capitalists  or  forms  of  government.  Like 
the  impulses  to  sin  they  are  protean,  but  unlike  these 
they  frequently  spring  from  sentiments  of  the  most 
sacredly  justifying  character.  Man  is  a  fighting  animal, 
and  in  the  last  analysis,  in  response  to  emotion  stronger 
than  himself,  will  fight  for  the  things  he  holds  dear.  The 
fighting  spirit  is  one  which  it  is  to  be  hoped  we  shall 
never  lose,  for  directed  along  right  channels  it  is  as 
necessary  as  the  spirit  of  peace.  It  is  not  enough  for 
a  nation  to  desire  justice;  it  must  have  the  will  and, 
when  needed,  the  power  to  enforce  it. 

Preparedness  for  national  defense  is  not  confined  to 
military  preparation  alone,  though  obviously  that  is  a 
matter  of  chief  importance  for  which  there  is  no  sub- 
stitute. In  addition,  however,  there  is  need  of  that 
intellectual  and  spiritual  training  which  will  bring  to 
the  individual  a  clear  comprehension  of  the  nature  and 
quality  of  our  institutions  and  an  abiding  sense  of  the 
importance  of  their  protection  against  destructive  or 


382  Reconstructing  America 

deteriorating  assaults  on  the  part  of  enemies  from  with- 
out or  from  within  our  borders. 

NEW   SPIRIT   OF  NATIONALISM 

It  is  highly  desirable  that  we  should  keep  alive  the 
new  spirit  of  nationalism,  which  has  been  born  of  the 
war,  and  which  is  fast  fusing  the  heterogeneous  groups 
of  German-Americans  and  Irish-Americans  and  other 
hyphenated  tribal  collections  into  a  homogeneous  body 
of  American  citizens  who  are  for  the  first  time  beginning 
to  realize  their  essential  unity.  If  no  other  benefit 
should  result  from  the  deadly  struggle,  the  firm  estab- 
lishment of  this  new  spirit  of  national  concord  would 
justify  every  sacrifice  we  have  made,  or  might  have 
been  called  upon  to  make,  however  terrible,  for  it  is  cer- 
tain that  only  thus  have  we  been  brought  to  an  under- 
standing of,  and  a  deliverance  from,  the  sinister  peril 
of  a  divided  allegiance  which  threatened  our  very  exist- 
ence as  a  separate  and  independent  people. 

That  form  of  internationalism  which  teaches  that 
the  stranger  beyond  our  gates  should  be  the  object  of 
our  solicitude  equally  with  the  loved,  mutually  helpful 
members  of  our  own  household  is  not  sound  sentiment 
but  maudlin  sentimentality.  The  form  of  internation- 
alism in  which  I  believe  is  that  of  cordial  cooperation 
among  nations  for  the  welfare  and  betterment  of  the 
people  of  all  lands  but  which  will  always  look  first  to 
the  welfare  and  betterment  of  our  own. 

FIRST   REQUISITE 

The  first  requisite  of  military  preparedness  is  an 
adequate  navy.  While  it  is  true  that  the  absence 


Military  Training  and  Preparedness     383 

of  an  adequate  English  army  probably  precipitated 
the  war,  and  undoubtedly  prolonged  it,  it  is  no  less  true 
that  only  the  strength  and  readiness  of  the  British 
navy  prevented  the  war  from  resulting  in  the  sub- 
jugation of  Europe.  For  three  years  it  was  liter- 
ally true  that  the  battleships  of  Great  Britain  stood 
between  the  democratic  world,  ourselves  included,  and 
supreme  disaster.  That  risk  we  must  never  incur 
again.  With  rich  and  vulnerable  coasts  fronting  on 
the  two  oceans,  easily  open  to  attack  or  invasion,  it 
is  little  short  of  criminal  folly  to  leave  them  without 
the  most  adequate  protection.  The  navy  as  the  first 
line '  of  defense  should  be  maintained  at  such  a  degree 
of  power  and  efficiency  as  to  furnish  a  fleet  for  the 
Atlantic  and  a  fleet  for  the  Pacific,  each  sufficiently 
powerful  to  afford  protection  against  attack  without 
the  aid  of  the  other ;  for  we  must  not  be  unprepared 
for  the  contingency  of  a  combination  of  European  and 
Asiatic  Powers  against  us.  The  bitter  lesson  of  this 
war  is  that  military  strength  cannot  be  improvised. 

We  must  strengthen  the  coast  fortifications  we  al- 
ready have  at  critical  points  and  construct  others 
wherever  needed,  and  maintain  them  all  at  the  highest 
level  of  efficiency  with  guns  which  in  range  and  power 
keep  pace  with  the  latest  and  best  expressions  of  mili- 
tary science.  The  personnel  of  the  coast  artillery  until 
recently  has  been  shamefully  and  dangerously  below 
the  most  meager  limit  of  necessity,  a  situation  the  exist- 
ence of  which  we  cannot  afford  to  permit  again ;  for 
it  is  useless  to  have  guns,  however  perfect,  without  ex- 
pert gunners  to  use  them.  The  coast  artilleryman  has 
a  greater  degree  of  technical  training  than  any  other 


384  Reconstructing  America 

man  in  the  military  service.  It  has  been  of  such  char- 
acter that  in  case  of  need  he  may  serve  with  the  field 
artillery,  the  machine  guns,  or  the  jnfantry ;  or  in  any 
service  where  a  working  knowledge  of  electric  appliances 
may  be  needed.  There  is  no  danger  of  having  an  over 
supply  of  those  highly  efficient  men. 

A  large  professional  army  is  not  desirable  for  several 
reasons,  among  them  that  it  takes  too  many  men  from 
the  productive  employments  and  is  a  heavy  burden  of 
expense.  It  will  be  sufficient  for  us  to  provide  for  and 
maintain  on  a  peace  footing  a  regular  army  of  from 
300,000  to  500,000  men,  fully  equipped  with  the  latest 
and  best  military  appliances  and  trained  and  kept  trained 
to  the  highest  point  of  modern  efficiency. 

UNIVERSAL   COMPULSORY   TRAINING 

Such  an  army,  however,  is  only  a  vanguard  and  will 
prove  altogether  insufficient  for  our  needs  in  any  de- 
fensive warfare  we  are  likely  to  be  called  upon  to  wage  — 
and  it  is  greatly  to  be  hoped  that  occasion  for  any  other 
kind  will  not  arise  — •  for  it  is  clear  that  only  a  very 
strong  military  Power,  or  combination  of  Powers,  will 
ever  assume  the  risk  of  attacking  us.  But  a  rich  nation 
like  ourselves,  ambitious  for  commercial  expansions, 
will  inevitably  run  counter  to  the  ambitions  of  other 
people  and  invite  animosities  which  may  easily  develop 
into  acts  of  aggression  unless  it  be  known  that  we  are 
prepared  to  overcome  force  with  greater  force.  To 
that  end  we  should  adopt  and  hereafter  maintain  a 
thorough-going  system  of  universal  compulsory  military 
training.  We  should  begin  with  our  boys  when  they 
reach  the  age  of  fourteen  years  by  imposing  as  part  of 


Military  Training  and  Preparedness    385 

their  regular  school  work  such  physical  training  as  will 
develop  their  strength  —  together  with  a  ready  ability 
to  use  it  —  their  courage,  self-reliance,  and  power  of  ini- 
tiative. An  admirable  foundation  upon  which  to  build 
this  system  is  that  afforded  by  the  principles  of  the  Boy 
Scout  movement.  When  these  boys  reach  the  age  of 
seventeen  years  their  military  training  should  begin 
and  continue  intensively  for  a  period  of  three  years. 
Either  the  Swiss  or  the  Australian  system  may  be  prof- 
itably adopted  and  under  either  system  not  more  than 
an  average  of  two  months  each  year  need  be  taken  for 
this  purpose.  This  will  not  interfere  with  the  educa- 
tion of  the  young  men  nor  their  usefulness  in  the  or- 
dinary pursuits  of  life.  The  result  will  be  that  in  a  few 
years  we  shall  have  a  potential  military  force  of  many 
millions  who  can  be  mobilized  and  made  ready  for  active 
service  in  a  few  weeks. 


CHAPTER  XIX 

PROBLEM  OF  AMERICANIZATION 
I 

THE  NEED  OF  A  DEFINITE  PROGRAM  OF  AMERICANIZA- 
TION OF  OUR  FOREIGN-BORN  PEOPLES 

BY  HON.  FRANKLIN  K.  LANE 

Secretary  of  the  Interior 

THE  war  with  its  recurring  crises  in  all  phases  of  our 
national  life  has  thrown  into  pronounced  relief  the 
vital  and  pressing  need  for  the  inauguration  of  a  definite 
and  comprehensive  program  for  the  assimilation  or 
Americanization  of  our  foreign-born  peoples.  In  answer 
to  this  need  the  Department  of  the  Interior  has  estab- 
lished an  Americanization  Division  in  the  Bureau  of 
Education. 

AMERICA'S  CHALLENGE 

America  threw  the  world  into  a  daring  maze  of  possi- 
bilities by  its  entrance  into  this  war  upon  lines  more 
idealistic  than  any  other  national  venture  in  history. 
And  in  doing  this  we  challenged  the  world  to  a  con- 
test for  supremacy,  not  upon  the  field  of  battle,  but  in 
the  much  larger  field  of  intellectual,  moral,  and  social 
leadership. 

The  world  has  taken  us  at  our  word.  We  said  that 
the  institutions  which  we  enjoyed  were  those  which 
the  world  should  enjoy,  for  they  were  based  upon  rights 

386 


Problem  of  Americanization          387 

inherent  in  man.  We  announced  ourselves  as  coming 
to  the  rescue  of  imperiled  democracies,  and  as  the  war 
progressed  we  came  to  the  point  where  we  would  dis- 
cuss peace  only  with  those  whose  government,  like  our 
own,  came  from  the  people.  Beaten  upon  land  and 
frustrated  upon  sea,  those  sole  surviving  autocracies 
with  which  we  fought  broke  into  fragments  before  the 
mandate  of  an  idea,  and  the  map  of  Europe  changed 
more  in  a  few  days  than  it  had  changed  in  centuries. 
The  aggregating  process  which  had  gone  on  through- 
out many  hundreds  of  years,  and  which  had  been  deemed 
essential  to  national  self-protection,  was  not  only  stayed 
but  set  at  naught,  and  nations  fell  into  pieces  like  a 
child's  picture  puzzle,  to  be  replaced  in  the  general 
picture  along  lines  of  racial  desire  and  a  common  cul- 
ture. This  is  an  unprecedented  thing  in  history. 
Enemy  nations  came  to  an  "about  face,"  professing 
themselves  converts  to  the  new  faith,  willing  pupils 
in  a  new  school.  Thus  out  of  an  international  struggle 
which  we  entered  upon  unwillingly  we  find  ourselves 
emerging  with  a  greater  burden  of  national  responsi- 
bility and  a  larger  sense  of  the  meaning  of  America  — 
America  as  a  leader  in  a  world  of  democracies,  if  not  a 
world  democracy. 

NEW  RESPONSIBILITIES 

What  change  in  national  policies  is  involved  in  this 
world  change?  Who  are  these  reborn  racial  groups 
who  now  come  forward  to  their  places  at  the  family 
table?  What  is  our  duty  toward  them  and  upon  what 
are  they  to  live?  What  economic  independence  is 
essential  to  national  existence?  To  what  extent  are 


388  Reconstructing  America 

we  trustees  for  other  peoples?  What  national  purposes 
have  we  that  should  be  made  secure  by  international 
pact  or  union?  Such  questions  go  deep  into  problems 
to  which  even  the  ripest  statesmen  have  in  the  past 
given  little  thought,  and  how  much  less  the  great 
body  of  the  people.  Yet  now  it  is  the  duty  of  the  Ameri- 
can citizen  to  know  of  these  things ;  to  talk  of  them,  as 
a  process  of  whipping  his  own  chaotic  notions  into  shape ; 
to  project  himself  into  a  world  where  all  horizons  are 
new.  While  yet  we  may  hardly  be  said  to  have  learned 
to  think  nationally,  we  are  compelled  to  give  serious 
concern  to  the  affairs  of  people  of  whom  we  had  not 
heard  four  years  ago.  Most  removed  and  isolated  of 
all  nations,  living  on  and  to  ourselves,  America  has 
over  night  moved  into  the  center  of  the  world's  stage 
and  become  subject  to  every  scrutinizing  and  critical 
eye.  This  is  a  test  for  all  that  we  have  of  dignity  and 
wisdom. 

WE    MUST   MEET   THE    TEST 

A  wholesale  challenge  has  been  given  as  the  result 
of  our  own  idealism  —  how  now  may  we  meet  it? 
Clearly  we  must  set  about  making  ourselves  adequate 
to  think  in  the  larger  terms  of  this  greater  life.  Yet 
we  must  hold  fast  to  that  which  makes  possible  any 
such  broad  conception  --  the  ability  of  men  and  women 
to  live  together  under  the  proved  form  of  our  own  Gov- 
ernment. To  think  in  terms  of  many  democracies  or 
of  mankind,  we  must  work  in  terms  of  America.  For 
all  thought  of  making  good  in  a  greater  sphere  must  be 
checked,  qualified,  and  limited  to  prove  our  capacity  by 
ourselves  first  of  all  strong  and  capable  and  purposeful 


Problem  of  Americanization          389 

at  home.  Our  international  value  depends  upon  our 
national  strength,  unity,  and  vision.  And  this  in  turn 
must  in  a  democracy  rest  upon  the  intelligence,  the 
capabilities,  and  the  character  of  the  individuals  who 
make  the  Nation. 

Our  war  experience  has  taught  us,  among  many 
things,  the  value  of  a  strong  national  spirit,  the  vital 
importance  of  national  ideals,  the  impotence  of  igno- 
rance, the  dependence  of  this  modern  world  upon  skilled 
men  arid  organizing  ability,  the  need  for  and  the  pos- 
sibilities that  lie  in  the  extension  of  cooperative  effort 
of  all  kinds.  Are  we  making  full  use  of  the  facilities 
that  we  have  for  the  promotion  of  these  ends?  Are 
we  making  out  of  America  as  a  growing  crop  all  that 
might  reasonably  be  expected  or  that  is  demanded  by 
our  position  in  the  world? 

AMERICA   IN    1918 

The  vitality  of  this  question  was  put  strongly  to  the 
Nation  during  the  past  year  in  a  form  that  was  not 
altogether  agreeable.  For  the  draft  revealed  the  aston- 
ishing percentage  of  those  in  this  country  who  were 
unable  to  speak  our  language  or  to  read  or  write  any 
language.  Yet,  I  take  it,  there  is  no  one  thing  so  su- 
premely essential  in  a  government  such  as  ours,  where 
decisions  of  such  importance  must  be  made  by  public 
opinion,  as  that  every  man  and  woman  and  child  shall 
know  one  tongue  —  that  each  may  speak  to  every 
other  and  that  all  shall  be  informed. 

There  can  be  neither  national  unity  in  ideals  or  in 
purpose  unless  there  is  some  common  method  of  com- 
munication through  which  may  be  conveyed  the  thought 


390  Reconstructing  America 

of  the  Nation.  All  Americans  must  be  taught  to  read 
and  write  and  think  in  one  language.  This  is  a  pri- 
mary condition  to  that  growth  which  all  nations  expect 
of  us  and  which  we  demand  of  ourselves. 

A  COMMON  LANGUAGE   IS   ESSENTIAL 

What  should  be  said  of  a  world-leading  democracy 
wherein  10  per  cent  of  the  adult  population  cannot 
read  the  laws  which  they  are  presumed  to  know? 

What  should  be  said  of  a  democracy  which  sends 
any  army  to  preach  democracy  wherein  there  was 
drafted  out  of  the  first  2,000,000  men  a  total  of  200,000 
men  who  could  not  read  their  orders  or  understand  them 
when  delivered,  or  read  the  letters  sent  them  from 
home? 

What  should  be  said  of  a  democracy  which  calls 
upon  its  citizens  to  consider  the  wisdom  of  forming 
a  league  of  nations,  of  passing  judgment  upon  a  code 
which  will  insure  the  freedom  of  the  seas,  or  of  sacrificing 
the  daily  stint  of  wheat  or  meat  for  the  benefit  of  the 
Roumanians  or  the  Jugo-Slavs  when  18  per  cent  of  the 
coming  citizens  of  that  democracy  do  not  go  to  school? 

What  should  be  said  of  a  democracy  in  which  one 
of  its  sovereign  States  expends  a  grand  total  of  $6  per 
year  per  child  for  sustaining  its  public  school  system  ? 

What  should  be  said  of  a  democracy  which  is  chal- 
lenged by  the  world  to  prove  the  superiority  of  its  system 
of  government  over  those  discarded,  and  yet  is  com- 
pelled to  reach  many  millions  of  its  people  through  papers 
printed  in  some  foreign  language? 

What  should  be  said  of  a  democracy  which  expends 
in  a  year  twice  as  much  for  chewing  gum  as  for  school- 


Problem  of  Americanization          391 

books,  more  for  automobiles  than  for  all  primary  and 
secondary  education,  and  in  which  the  average  teacher's 
salary  is  less  than  that  of  the  average  day  laborer? 

What  should  be  said  of  a  democracy  which  permits 
tens  of  thousands  of  its  native-born  children  to  be  taught 
American  history  in  a  foreign  language  —  the  Declara- 
tion of  Independence  and  Lincoln's  Gettysburg  speech 
in  German  and  other  tongues? 

What  should  be  said  of  a  democracy  which  permits 
men  and  women  to  work  in  masses  where  they  seldom 
or  never  hear  a  word  of  English  spoken? 

Yet,  this  is  all  true  of  the  United  States  of  America 
in  this  year  of  grace  1918,  wherein  was  fought  the 
second  Battle  of  the  Marne  and  the  Battle  of  the  Ar- 
gonne  Forest. 

These  figures  and  facts  look  discouraging.  They 
seem  to  present  a  picture  that  bodes  ill  for  the  Republic. 
But  in  reality  they  present  an  outlook  that  is  far  from 
disturbing  and  that  is  the  one  cheering  thing  about 
such  a  Government  as  ours,  wherein  we  can  do  as  we 
will.  And  our  will  to  do  is  never  wanting  when  we  see 
clearly  the  difficulty  and  know  the  way  out. 

A   NATIONAL   CONCERN 

If  once  we  realize  that  education  is  not  solely  a  State 
matter  but  a  national  concern,  the  way  is  open.  And 
what  argument  that  could  be  advanced  would  be  more 
persuasive  that  education  deserves  and  must  have  the 
consideration  of  the  Central  Government  than  the 
figures  that  are  given  ? 

If  men  cannot  be  converted  readily  into  soldiers 
but  must  be  held  in  camp  while  they  receive  a  primary 


392  Reconstructing  America 

education,  surely  no  one  can  hold  that  this  is  a  matter 
deserving  of  merely  State  attention.  The  Nation's 
life  may  not  have  been  imperiled  by  the  presence  in 
the  army  of  a  considerable  percentage  of  men  who  could 
not  be  equipped  for  service  promptly,  but  this  is  the 
minor  part  of  the  reason  why  this  humiliating  condition 
should  not  obtain  in  this  country.  The  greater  reason 
is  that  we  cannot  govern  ourselves  while  in  ignorance. 
We  cannot  have  a  small  portion  of  our  population  un- 
able to  sense  the  movement  of  our  times  save  through 
the  gossip  of  the  corner  and  altogether  unable  to  check 
the  idle  rumor  and  the  slogans  of  demagogues,  without 
putting  at  hazard  the  success  of  our  system  of  govern- 
ment. And  if  we  lag  others  will  lead.  The  American 
must  be  the  exemplar  of  democracy. 

II 

AMERICANIZATION   DEFINED 

BY  RALPH   PETERS 
Federal  Manager  in  the  United  States  Railroad  Administration 

Americanization  means  to  convert  men  and  women 
into  first-class  citizens,  filled  with  proper  regard  and 
respect  for  our  institutions,  for  our  language,  our 
churches,  our  schools,  our  courts,  our  municipal,  State, 
and  national  forms  of  government,  together  with  a 
full  appreciation,  not  only  of  the  rights  and  privileges 
of  citizenship,  but  of  the  obligations  and  duties  of  citi- 
zenship as  guaranteed  under  the  Constitution. 

Our  gates  have  been  open  to  all  comers,  regardless 
of  race  or  nationality.  Time  alone  has  generally  been 
the  requirement  for  citizenship.  Consequently  we  have 
among  us  a  vast  number  of  citizens  who  do  not  know 


Problem  of  Americanization          393 

or  speak  our  language,  who  retain  the  customs  and 
habits  of  their  old  countries,  who  do  not  care  for  our 
laws  and  our  institutions,  who  continue  to  show  their 
prejudices  against  the  laws  and  institutions  of  their 
former  homes,  and  feel  that  it  is  necessary  to  attack 
our  laws  and  our  institutions  because  of  that  feeling. 
There  are  also  citizens  who  seek  only  our  money,  and 
with  it  claim  freedom  of  speech,  licentiousness  rather 
than  liberty,  without  a  single  obligation  to  their  new 
country. 

INFLUENCE   OF   THE   CHURCH 

Their  children  generally  become  good  citizens  through 
the  benign  influence  of  the  Church  and  the  public 
schools.  But  more  than  this  must  be  done  if  we  should 
hope  to  make  real  Americans  out  of  them.  Prohibit 
the  use  of  newspapers  and  magazines  published  in 
foreign  languages  ;  prohibit  the  right  to  vote  until  every 
one  understands  and  appreciates  the  privilege  of  voting  ; 
have  compulsory  education  for  both  the  old  and  the 
young  until  there  is  a  full  appreciation  of  what  it  means 
to  be  an  American  citizen. 

When  that  is  done,  there  should  be  a  poll  tax  for 
all  naturalized  voters.  I  feel  that  if  they  had  to  pay 
for  the  privilege  of  voting,  they  would  soon  be  forced 
into  an  appreciation  of  citizenship  and  a  full  develop- 
ment of  Americanism. 

Ill 
THE  SMITII-BANKIIEAD  AMERICANIZATION  BILL 

The  following  astounding  facts  demand  the  immediate 
consideration  of  the  Nation.  The  war  has  demon- 
strated conclusively  that  large  numbers  of  our  foreign- 


394  Reconstructing  America 

born  citizens  have  not  been  definitely  assimilated 
or  Americanized.  It  also  brought  forth  thousands 
upon  thousands  of  men,  native-born  Americans  for 
many  generations,  who  cannot  read  nor  write.  Con- 
sider the  following  figures : 

Over  ten  years  of  age  and  illiterate  (1910)     5,502,351 
Unable  to  speak  English  3,089,723 

Total  8,592,074 

Eight  and  one  half  millions  of  people  who  cannot 
read  the  newspapers  or  the  laws  of  their  country! 
Millions  who  cannot  speak  English ! 

This  is  more  people  than  were  in  the  whole  United 
States  in  1800. 

It  is  more  people  than  in  the  entire  South  in  the  Civil 
War. 

It  is  more  people  than  now  live  in  all  the  following 
States  combined :  Nevada,  Wyoming,  Delaware,  Ari- 
zona, Idaho,  Mississippi,  Vermont,  Rhode  Island, 
North  Dakota,  South  Dakota,  Oregon,  Maine,  Florida, 
Connecticut,  and  Washington. 

It  is  more  than  all  the  people  of  any  State  in  the 
Union  except  one. 

It  is  more  than  the  combined  populations  of  greater 
New  York,  Philadelphia,  and  Chicago. 

It  is  more  than  all  the  people  in  all  the  cities  of  New 
York  State  put  together. 

It  is  more  than  all  the  people  in  all  the  cities  of  the 
United  States  west  of  the  Mississippi  River  except  one. 

It  is  more  than  all  the  children  of  school  age  in  thirty- 
two  States  of  the  Union  combined. 


Problem  of  Americanization          395 


A  NATIONAL  PROBLEM  —  ILLITERACY 

This  is  a  national  problem.  The  South  leads  in 
illiterates.  The  North  leads  in  non-English  speaking. 
Seventeen  and  one  fourth  per  cent  of  the  people  of 
the  east  south  central  States  are  illiterate,  but  15.8%  of 
the  people  in  Passaic,  N.  J.,  cannot  read,  speak,  or  write 
English.  Sixteen  per  cent  of  the  people  of  the  south 
Atlantic  States  are  illiterate,  and  so  are  13.2%  of  the 
people  of  Lawrence  and  Fall  River,  Massachusetts. 

To  meet  this  problem  Senator  Hoke  Smith  has  intro- 
duced in  the  Senate  and  Honorable  William  B.  Bank- 
head  in  the  House  the  Smith-Bankhead  Americaniza- 
tion Bill. 

This  bill  provides  for  the  cooperation  of  the  States 
and  Federal  Government : 

In  the  education  of  native  illiterates,  of  persons  unable 
to  understand  and  use  the  English  language  and  of 
other  resident  persons  of  foreign  birth,  and 

In  the  education  of  such  persons  in  the  English  lan- 
guage, the  fundamental  principles  of  government  and 
citizenship,  the  elements  of  knowledge  pertaining  to 
self-support  and  home  making,  and  in  such  other  work 
as  will  assist  in  preparing  such  illiterates  and  foreign- 
born  persons  for  successful  living  and  intelligent  Ameri- 
can citizenship. 

It  requires  compulsory  courses  in  English  for  all  illit- 
erate minors  sixteen  years  of  age  and  over. 


CHAPTER  XX 

PROHIBITION  AND   THE   PEOPLE 
I 

THE  PROHIBITION  AMENDMENT  AND  STATE  RIGHTS 

BY  WILLIAM   II.   HIRST 
Attorney  for  New  York  State  Brnvers'  Association 

The  point  of  attack  on  the  carrying  out  of  the  Federal 
amendment  will  be  constitutional.  There  are  three 
main  points  to  be  taken  up  and  one  or  two  minor  ones : 

First,  was  the  method  of  passing  the  amendment  in 
the  houses  of  Congress  according  to  the  law  as  given  in 
the  Constitution?  Two,  does  the  amendment  conflict 
with  the  police  power  of  the  State  as  laid  down  in  the 
Constitution?  Three,  does  the  amendment  violate  the 
Constitution  in  giving  the  Federal  Government  and  the 
State  Government  concurrent  police  power? 

Not  the  least  important  attack  will  be  made  on  the 
passing  of  the  amendment  on  the  first  point.  Article 
V  of  the  Constitution,  dealing  with  the  amending  of 
the  Constitution,  is  as  follows  : 

The  Congress,  whenever  two  thirds  of  both  houses 
shall  deem  it  necessary,  shall  propose  amendments  to 
this  Constitution,  or,  on  the  application  of  the  Legisla- 
tures of  two  thirds  of  the  several  States,  shall  call  a 
convention  for  proposing  amendments,  which,  in  either 

596 


-  Prohibition  and  the  People  397 

case,  shall  be  valid  to  all  intents  and  purposes,  as  part 
of  this  Constitution,  when  ratified  by  the  Legislatures 
of  three  fourths  of  the  several  States,  or  by  conventions 
in  three  fourths  thereof,  as  the  one  or  the  other  mode  of 
ratification  may  be  proposed  by  the  Congress ;  provided 
that  no  amendment  which  may  be  made  prior  to  the  year 
1808  shall  in  any  manner  affect  the  first  and  fourth 
clauses  in  the  Ninth  Section  of  the  First  Article ;  and 
that  no  State,  without  its  consent,  shall  be  deprived  of 
equal  suffrage  in  the  Senate. 


When  the  amendment  went  through  Congress  it 
was  passed  by  a  two  thirds  vote  of  the  members  present, 
but  not  by  a  two  thirds  vote  of  all  the  members  of  both 
houses.  The  contention  is  made  by  the  men  on  the 
other  side  of  the  question  that  this  is  legal ;  that  in  order 
to  make  an  act  of  legislation  legal  all  that  is  demanded 
is  the  presence  of  what  is  considered  a  quorum  of  the 
members  of  both  houses.  I  agree  with  them  there. 
But  this  is  not  an  act  of  legislation.  This  is  an  amend- 
ment to  the  national  document  of  laws  and  liberties. 

Is  or  is  not  an  amendment  to  be  considered  on  the 
same  basis  as  a  law  which  may  be  purely  temporary  and 
passed  as  an  exigency  to  meet  a  situation?  It  seems 
to  me  that  the  former  is  a  good  deal  more  serious  in 
content  and  requires  exactly  what  the  words  of  the 
article  demand,  ''The  Congress  whenever  two  thirds  of 
both  Houses  shall  deem  it  necessary.  ..."  The  mem- 
bers of  the  Houses  cannot  shirk  their  responsibility  in 
such  a  case.  The  matter  is  of  sufficient  importance  for 
them  to  be  present  and  state  definitely  on  which  side  of 
the  fence  they  stand.  If  the  amendment  had  been 
introduced  through  the  second  method  of  introduction, 


398  Reconstructing  America 

that  is,  having  two  thirds  of  the  States  make  applica- 
tion for  it,  it  would  not  have  been  considered  sufficient 
to  have  only  two  thirds  of  those  States  intensely  op- 
posed or  intensely  in  favor  of  the  amendment  present 
the  article  for  Congressional  action,  omitting  those 
States  indifferent  to  the  question.  The  analogy  may 
seem  far-fetched,  but  it  isn't.  An  amendment  con- 
trolling the  liberties  of  the  people  of  a  nation  seems 
to  me  to  be  important  enough  to  require  more  con- 
sideration than  this  one  received. 

SCOPE   OF   POLICE   POWER 

Now  for  point  two  :  Does  the  amendment  conflict  with 
the  police  power  as  laid  down  in  the  Constitution? 
The  amendment,  as  it  stands  to-day,  reads  as  follows : 

Section  i.  —  After  one  year  from  the  ratification  of 
this  article,  the  manufacture,  sale,  or  transportation  of 
intoxicating  liquors  within,  the  importation  thereof  into, 
or  the  exportation  thereof  from  the  United  States  and 
all  territory  subject  to  the  jurisdiction  thereof  for 
beverage  purposes  is  hereby  prohibited. 

Sec.  2.  —  The  Congress  and  the  several  States  shall 
have  concurrent  power  to  enforce  this  article  by  ap- 
propriate legislation. 

Sec.  3. — This  article  shall  be  inoperative  unless  it 
shall  have  been  ratified  as  an  amendment  to  the  Consti- 
tution by  the  Legislatures  of  the  several  States,  within 
seven  years  from  the  date  of  the  submission  hereof  to 
the  States  by  the  Congress. 

The  right  of  a  State  to  control  its  internal  affairs  and 
the  social  life  of  the  people  is  expressed  in  Article  X  of 
the  amendments:  "The  powers  not  delegated  to  the 


Prohibition  and  the  People  399 

United  States  by  the  Constitution,  nor  prohibited  by 
it  to  the  States,  are  reserved  to  the  States  respectively, 
or  to  the  people."  This  question  of  States'  rights  was 
of  the  greatest  moment  when  the  Constitution  was 
framed.  The  article  given  above  assured  to  the  States 
just  that  power  which  the  prohibition  amendment  is 
taking  away.  The  question  came  up  at  the  time  of  the 
civil  war.  There  was  no  attempt  by  President  Lincoln 
to  interfere  with  the  jurisdiction  or  determination  of 
any  State  on  the  question  of  slavery.  State  sovereignty 
remained  unassailed. 

The  national  prohibition  movement  is  not  so  conserva- 
tive. It  is  not  comparable  to  a  combination  of  States 
which  is  opposing  the  extension  of  institutions  of  other 
States.  It  is  a  proposal  to  force  upon  all  the  States  the 
conception  of  morality  and  standard  of  life  and  personal 
habits  which  some  States  decide  shall  be  uniform  through- 
out the  country.  Its  realization  would  change  the  Con- 
stitution from  a  charter  of  liberty  and  inviolable  rights 
to  one  of  oppression  and  denial  of  rights,  and  centrif- 
ugal force.  In  no  matter  are  people  so  apt  to  pull  in 
different  directions  and  to  oppose  each  other's  inter- 
ference and  restrictions  as  in  their  social  affairs  and 
private  habits. 

In  order  to  bring  past  history  into  the  light  of  present 
events  and  thus  enable  us  to  form  judgments  and  opin- 
ions based  upon  principle  and  logic  and  not  hysteria 
and  bias,  we  must  go  back  into  history  and  look  into  the 
genesis  of  our  Federal  Constitution.  The  formation  of 
the  American  system  of  government  started  with  the 
distinct  understanding  and  reaffirmation  of  funda- 
mental rights,  privileges,  and  immunities  which  could 


400  Reconstructing  America 

not  be  taken  away,  but  which  remained  inviolable  in  the 
individual.  In  order  that  they  might  not  be  lost  sight 
of  in  the  larger  compact  which  had  to  be  formed  to 
establish  a  Federal  system,  every  gathering  or  conven- 
tion which  considered  that  system  emphasized  the  re- 
tention to  each  unit  which  entered  into  it  of  the  great- 
est possible  amount  of  control  over  the  internal  affairs 
of  that  unit,  whether  it  was  a  trading  post,  a  colony, 
or  a  State.  The  most  vital  point  brought  into  the  dis- 
cussion at  the  Constitutional  Convention  was  the  pro- 
tection of  the  rights  of  the  State  against  infringement 
by  the  Federal  Government. 

QUESTION   OF   CENTRALIZATION 

The  convention  was  dominated  in  its  final  conclusion 
by  the  desire  to  grant  as  little  as  possible  to  a  central 
legislative  Government  consistent  with  the  mutual 
welfare  of  the  States  and  to  protect  and  uphold  the 
dignity  and  autonomy  of  the  separate  States.  Specific 
powers  were  delegated  to  the  Federal  Government  and 
denied  to  the  States  and  other  specific  powers  were 
reserved  unequivocally  by  the  States. 

Through  130  years  of  growth  and  development  and 
of  bitter  and  sometimes  bloody  controversy  over  the 
rights  of  the  Federal  Government  and  the  rights  of 
the  State  Government  one  great  fact  has  stood  out 
prominently.  It  is  this  :  In  no  instance  has  there  been 
an  indication  or  any  claim  of  the  most  ardent  Federalist 
of  the  right  of  trespass  upon  or  curtailment  of  the  police 
power,  which  is  especially  and  exclusively  left  to  the 
State  within  its  own  limits.  From  the  aim  of  our 
Government,  both  National  and  State,  from  the  theory 


Prohibition  and  the  People  401 

of  our  Federal  Constitution  and  the  intent  of  its  framers, 
from  the  motive  which  inspired  the  first  ten  amendments 
and  the  interpretation  of  the  fundamental  law  through 
more  than  a  century  and  a  quarter,  and  from  the  man- 
dates of  both  the  explicit  division  of  rights  between  the 
State  and  Federal  sovereignty  and  the  exercise  of  these 
rights  by  the  appointed  sovereignties,  it  seems  to  me 
that  the  following  conclusions  are  not  beside  the  mark : 

1.  The  police  power  does  not  lie  in  the  twilight  zone 
of  doubtful  jurisdiction,  but  is  clearly  and  unquestion- 
ably lodged  in  the  separate  States  and  denied  to  the 
National  Government,  and  should  remain  in  the  States. 

2.  That  the  regulation  and  control  of  the  social  habits 
and  private  lives  of  the  people  within  a  State  fall  under 
and  are  subject  to  the  police  power,  and  belong  to  the 
State  absolutely,  and  cannot  be  undertaken  or  inter- 
fered with  by  the  National  Government  in  any  manner. 

3.  That  there  can  properly  be  no  jurisdiction  in  our 
legislation    by   Congress   with   respect   to    the    sale    of 
alcoholic   drinks   within    the   States   except    as    a   war 
measure. 

4.  That  any  change  in  our  system  of  government 
which    takes   from    the   States    the   regulation   of    the 
sale  of   alcoholic  drinks  would   be  in  violation  of   the 
fundamental    principles    of^  the    Federal    Government, 
and    would    encroach    upon    the    police    power    which 
was  one  of  the  rights  and  prerogatives  plainly  and  in- 
disputably reserved  to  the  States  and  always  exercised 
by  them,  and  would  constitute  a  dangerous  precedent 
for  further  absorption  by  the  National  Government  of 
powers  which  essentially  TO  to  make  up  State  sovereignty. 

5.  That   each    State,    by   the   exercise   of   its   police 


402  Reconstructing  America 

power  as  amplified  by  the  Webb-Kenyon  and  Reed 
acts  of  Congress,  has  absolute  control  of  the  liquor 
traffic  within  its  confines  and  may  adopt  and  effectively 
enforce  any  degree  of  prohibition  or  restriction  over  the 
traffic  in  liquors  from  an  absolute  "bone-dry"  law  to 
one  of  license  and  regulation.  It  may  make  the  mere 
possession  of  a  bottle  of  beer  or  wine  in  one's  home  a 
crime,  or  it  may  give  permission  to  have  it  under  such 
restrictions  and  control  as  will  protect  the  people  of  the 
State  and  preserve  their  rights. 

6.  That  the  Federal  Government  has  never  attempted 
to,  nor  should  it  interfere  with  the  domestic  affairs  of  the 
States,  upon  whose  individual  greatness,  strength  and 
sovereignty  the  power  and  majesty  of  their  combina- 
tion depend. 

7.  That  the  amendment  of  the  Federal  Constitution 
providing  for  national  prohibition  strips  the  State  of  a 
most  essential  part  of  its  police  power  and  deprives  this 
generation  and  the  ones  to  follow  of  the  right  of  ever 
hereafter  having  a  voice  in  the  regulation  and  control 
of  the  internal  affairs  and  social  habits  of  the  people  of 
that  State  and   forfeit   to  other  States  of   the  Union 
the  control  and  regulation  of  those  affairs  and  habits. 

8.  It  would  constitute  an  act  of  ultra  vires  (beyond 
power  of)  in  so  much  as  it  was  never  intended  or  dreamed 
that  any  combination  of   States  could  deprive  a  State 
of  its  sovereignty.     President  Lincoln  said,  "No  State 
has  a  right  to  secede  from  the  Union  without  the  con- 
sent of  all  the  States.''     In  the  same  manner,  no  State 
can  be  deprived  of  this  sovereignty  without  the  consent 
of  all  the  States. 


Prohibition  and  the  People  403 

"CONCURRENT"  POWERS 

Point  three  deals  with  the  concurrent  police  power 
given  to  the  State  and  Federal  Government.  The  Anti- 
Saloon  League  people  injected  into  the  amendment  the 
very  confusion  of  power  and  conflict  of  jurisdiction  which 
the  Federal  Constitution  studiously  sought  to  avoid.  Up 
to  the  present  time,  this  has  been  avoided.  This  power 
of  concurrent  jurisdiction  will  lead  to  one  of  two  things  — 
the  amendment  will  either  be  made  meaningless  and  a 
mockery,  or  a  conflict  of  authority  will  arise  in  carrying 
out  the  excise  laws  which  will  be  a  menace  to  national 
unity.  Where  the  Government  has  proper  jurisdiction 
it  derives  its  authority  from  powers  delegated  to  it  by  the 
States,  and  its  power  is  exclusive.  It  necessarily  must  be. 

The  attempted  delegation  of  power  back  to  the  States, 
which  is  involved  in  this  proposal  of  concurrent  juris- 
diction, is  contrary  to  constitutional  intent  and  sanction. 
This  clause  is  not  merely  the  result  of  accident  or  mistake, 
but  it  is  the  inevitable  and  unavoidable  situation  which 
must  arise  when  the  Federal  Government  is  given  cog- 
nizance over  a  matter  which  is  intrinsically  one  for  ex- 
clusive jurisdiction.  Where  there  is  a  deviation  from 
the  doctrine  of  the  correct  and  proper  division  of  sover- 
eignty between  the  Federal  Government  and  the  State 
Government  and  a  departure  from  the  correct  prin- 
ciple of  Constitution  making,  the  clash  between  the  two 
is  inevitable,  and  when  that  clash  happens  we  discover 
that  an  unconstitutional  amendment  of  the  Constitution 
has  been  attempted.  The  escape  from  such  a  clash  lies 
only  in  having  each  sovereignty  attend  to  those  matters 
which  come  properly  within  its  scope. 


404  Reconstructing  America 


EX-PRESIDENT   TAFT  S   OPINION 

Ex-President  Taft  expressed  himself  as  follows  on 
this  point  in  discussing  the  prohibition  amendment : 

The  reaching  out  of  the  great  central  powers  to  brush 
the  doorsteps  of  local  communities,  far  removed  geo- 
graphically from  Washington,  will  be  irritating  in  such 
States  and  communities,  and  will  be  a  strain  upon  the 
bond  of  the  national  Union.  It  will  produce  variation 
in  the  enforcement  of  the  law.  There  will  be  loose 
administration  in  spots  all  over  the  United  States  and 
a  politically  inclined  national  Administration  will  be 
strongly  tempted  to  acquiesce  in  such  condition.  Elec- 
tions will  continuously  turn  on  the  rigid  or  languid 
execution  of  the  liquor  law,  as  they  now  do  in  the  pro- 
hibition States.  The  ever  present  issue  will  confuse  and 
prevent  clear  and  clean-cut  popular  decisions  on  the 
most  important  national  questions,  and  the  politics  of 
the  nation  will  be  demoralized  as  the  politics  of  States 
have  been  through  this  cause. 

The  theory  that  the  National  Government  can  en- 
force any  law  will  yield  to  stubborn  circumstances,  and  a 
Federal  law  will  become  as  much  a  subject  of  contempt 
and  ridicule  in  some  parts  of  the  nation  as  laws  of  this 
kind  have  been  in  some  States.  .  .  . 

Another  point  that  might  here  be  mentioned  along 
with  the  discussion  on  the  constitutionality  of  the  amend- 
ment is  the  one  of  referendum.  Among  the  States  whose 
Legislatures  have  voted  favorably  on  the  amendment 
there  are  some  whose  constitutions  provide  for  referen- 
dum. I  believe  there  are  fourteen  or  fifteen  of  these. 
If  it  can  be  proved  that  the  vote  of  the  Legislatures  in 
these  States  is  void  before  it  is  referred  to  popular  vote, 


Prohibition  and  the  People  405 

then  the  required  number  of  ratifying  States  has  of  course 
not  yet  been  reached. 

The  Constitution  provides  that  the  amendment  is 
to  be  submitted  to  the  Legislatures  of  the  States.  But 
what  is  meant  by  the  Legislatures  in  those  States  work- 
ing under  the  referendum  law?  If  it  means  the  person 
chosen  to  sit  in  the  elected  body  called  the  Legislature, 
then  there  need  be  no  referendum  on  the  question.  That 
was  the  only  kind  of  Legislature  known  at  the  time  the 
Constitution  was  adopted  in  1787.  But  if  the  framers 
of  the  Constitution  meant  by  the  word  Legislature  the 
legislative  machinery  of  the  States,  then  ratification  is 
not  complete  until  in  addition  to  the  action  of  the  elected 
legislators,  it  is  also  submitted  to  the  vote  of  the  people 
and  approved  by  them.  There  is  eminent  legal  authority 
for  the  belief  that  in  States  having  referendum  the 
amendment  must  be  submitted  to  the  vote  of  the  people 
before  it  can  be  finally  disposed  of.  This  undoubtedly 
is  so  with  respect  to  Ohio,  where  the  Constitution  pro- 
vides for  a  referendum  on  proposed  Federal  amendments. 


NOT   AN   AMENDMENT 

That  the  national  prohibition  amendment  is  in  reality 
not  an  amendment,  but  simply  a  piece  of  legislation 
which  the  States  have  been  asked  to  concur  in  under 
the  guise  of  an  amendment,  is  another  point  which  the 
lawyers  expect  to  bring  out.  The  amendment,  however, 
cannot  be  accepted  as  an  act  of  legislation,  because  it 
was  not  approved  by  the  President  and,  further,  because 
it  is  not  sanctioned  by  the  present  constitutional  powers 
of  Congress. 


406  Reconstructing  America 

If  it  were  possible  at  all  under  our  system  of  govern- 
ment to  transfer  the  control  and  regulation  of  manufac- 
ture, sale,  and  use  of  liquor  to  the  Federal  Government, 
it  could  only  be  accomplished  by  amending  Section  8  of 
Article  I  of  the  Constitution,  by  adding  to  the  powers  al- 
ready expressly  vested  in  Congress  the  power  to  control 
and  regulate  or  prohibit  the  manufacture,  sale,  and  use  of 
intoxicating  liquors.  This  would  set  up  a  permanent 
process  for  dealing  with  the  question,  but  it  would 
avoid  the  danger  and  mischief  of  setting  up  a  permanent 
decision.  Congress  would  then  have  been  clothed  with 
the  power  to  deal  with  the  liquor  question  as  public 
interest  and  public  sentiment  might  require  from  time  to 
time.  Should  that  public  interest  and  public  sentiment 
call  for  a  change  or  modification,  it  would  be  within  the 
powers  of  Congress  to  make  whatever  change  or  modi- 
fication the  prevailing  public  opinion  of  the  time  called 
for.  Under  the  amendment  Congress  will  be  unable  to 
make  any  change  or  modification,  whatever  may  be  the 
demands  of  expediency,  justice,  or  public  opinion. 

II 

PROHIBITION  A  GLARING  ERROR 

BY  STATE  SENATOR  HENRY  SAGE 
In  Xcw  York  Senate 

The  Assembly  having  passed  the  amendment  the 
proponents  now  expect  that  this  branch  of  the  Legisla- 
ture will,  under  the  impulse  of  fear  and  hysteria,  give 
its  seal  of  approval  to  one  of  the  most  glaring  errors  ever 
perpetrated  by  Congress.  Any  one  who  has  lived  in  a 
State  where  prohibition  has  been  enforced  will  admit 


Prohibition  and  the  People  407 

that  there  has  been  an  increase  in  the  drug  habit,  and 
reputable  physicians  predict  that  this  practice  will 
enlarge  and  become  a  menace  to  our  entire  citizenry, 
drugs  being  much  more  disastrous  physically,  mentally, 
and  morally  than  alcohol. 

No  great  nation  has  yet  tried  the  experiment.  One 
once  considered  making  the  attempt.  But  it  is  impos- 
sible to  tell  yet  whether  the  "wets"  in  Russia  have  killed 
all  theadrys"or  the  "drys"  have  killed  all  the  " wets," 
or  whether  there  are  enough  left  of  each  faction  to  make 
prohibition  a  national  issue  or  whether  the  supply  of 
vodka  has  given  out.  All  that  we  know  is  that  Russia 
is  no  longer  a  great  nation  and  that  all  it  contains  is 
two  classes  —  those  who  kill  and  those  who  get  killed. 

Ill 

"DRYS"  A  MENACE  TO  THE  REPUBLIC 

BY  HENRY  WATTERSON 

Editor  Emeritus  Louisville  Courier-Journal 

The  Billy  Sunday  game  has  made  Billy  Sunday  rich. 
Having  exhausted  hell-fire-and-brimstone  the  evangel 
turns  to  the  Demon  Rum.  Satan,  with  hide  and 
horns,  has  had  his  day.  Prohibition  is  now  the  win- 
ning card. 

The  fanatic  is  never  either  very  discriminating  or 
very  particular.  As  a  rule,  for  him  any  taking  "ism" 
will  suffice.  To-day  it  happens  to  be  "  whisky," 
so  called.  To-morrow  it  will  be  tobacco.  Finally, 
having  established  the  spy-system  and  made  house-to- 
house  espionage  a  rule  of  conventicle,  it  will  become  a 
misdemeanor  for  a  man  to  kiss  his  wife. 


408  Reconstructing  America 

From  fakers  who  have  cards  up  their  sleeves,  not  to 
mention  snakes  in  their  boots,  we  hear  a  great  deal  about 
"the  people,"  pronounced  by  them  as  if  it  were  spelled 
"peepul."  It  is  the  unfailing  recourse  of  the  profes- 
sional politician  in  quest  of  votes.  Yet  scarcely  any 
reference  or  referee  were  faultier. 

The  people  en  masse  constitute  what  we  call  the 
mob.  Mobs  have  rarely  been  right  —  never  except 
when  capably  led.  It  was  the  mob  of  Jerusalem  that 
did  the  unoffending  Jesus  of  Nazareth  to  death.  It 
was  the  mob  in  Paris  that  made  the  Reign  of  Terror. 
From  that  day  to  this  mobs  seldom  have  been  tempted, 
even  had  a  chance  to  go  wrong,  that  they  have  not  gone 
wrong. 

The  "people"  is  a  fetish.  It  was  the  people,  misled, 
who  precipitated  the  South  into  the  madness  of  seces- 
sion and  the  ruin  of  a  hopelessly  unequal  war  of  sections. 
It  was  the  people  backing,  if  not  compelling,  the  Kaiser 
who  committed  hari-kari  for  themselves  and  their 
empire  in  Germany.  It  is  the  people  leaderless  who  are 
now  making  havoc  in  Russia.  Throughout  the  length 
and  breadth  of  Christendom,  in  all  lands  and  ages,  the 
people  when  turned  loose  have  raised  every  inch  of 
hell  to  the  square  foot  they  were  able  to  raise,  often 
upon  the  slightest  pretext  or  no  pretext  at  all. 

MORTAL   FALLIBILITY    OF   MAN 

This  is  merely  to  note  the  mortal  fallibility  of  man, 
most  fallible  when  herded  in  groups  and  prone  to  do  in 
the  aggregate  what  he  would  hesitate  to  do  when  left 
to  himself  and  his  individual  accountability. 

Under  a  wise  dispensation  of  power,  despotism,  we  are 


Prohibition  and  the  People  409 

told,  embodies  the  best  of  all  government.  The  trouble 
is  that  despotism  is  seldom,  if  ever,  wise.  It  is  its 
nature  to  be  inconsiderate,  being  essentially  selfish, 
grasping,  and  tyrannous.  As  a  rule,  therefore,  revolu- 
tion —  usually  of  force  —  has  been  required  to  change  or 
reform  it. 

In  fine  and  in  short,  ours  is  a  world  of  sin,  disease, 
and  death  —  perfectibility  not  designed  or  intended  for 
mortal  man.  That  indeed  furnishes  the  strongest 
argument  in  favor  of  the  immortality  of  the  soul, 
life  on  earth,  but  the  ante-chamber  of  eternal  life. 
It  would  be  a  cruel  deity  that  condemned  man  to 
the  brief  and  vexed  span  of  human  existence  with 
nothing  beyond  the  grave.  With  intolerance  the  order 
of  the  day,  fanaticism  in  the  saddle  —  the  Bolsheviki 
on  the  way  — no  outcry  anywhere  —  shall  there  not 
be  protest? 

COULD  DESPOTISM  GO  FARTHER? 

Could  despotism,  unscrupulous  and  ignorant,  go  far- 
ther toward  the  tearing  down  of  the  bases  on  which  the 
free  fabric  of  the  American  Republic  was  established? 
If  the  men  behind  it  were  merely  possessed  by  the  ob- 
session that  drink  is  the  only  menace  and  that  its  extir- 
pation will  cure  all  the  evils  alike  of  the  body  corporate 
and  body  politic,  we  might  with  some  hope  treat  it 
as  a  delusion,  or  a  disease.  But  it  is  supported  by  a 
scheme  of  aggrandizement  as  powerful  and  corrupt  as 
any  which  has  ever  appeared  in  modern  affairs.  The 
Anti-Saloon  League  —  a  high-sounding  name  which  has 
no  organized  rank  and  file  and  no  direct  responsibility  - 
is  self-officered  by  a  body  of  shrewd  mercenaries  who 


410  Reconstructing  America 

live  and  thrive  by  a  confidence  game  played  upon  the 
gullibility  of  the  Church,  the  women  and  the  children; 
its  only  ritual  the  denunciation  of  the  Rum  Demon ; 
its  single  ceremonial  the  passing  of  the  hat.  It  is  a 
corporation  equally  without  a  charter  and  without  a 
soul. 


CHAPTER  XXI 

THE    GOVERNMENT'S    RECONSTRUCTION    PLANS 
UNDER  THE  COUNCIL  OF  NATIONAL  DEFENSE 

UNDER  the  U.  S.  Council  of  National  Defense  at 
Washington,  consisting  of  the  Secretaries  of  War,  Navy, 
Interior,  Commerce  and  Labor,  there  was  built  up, 
during  the  war,  through  the  cooperation  of  the  Governors 
of  the  forty-eight  States,  a  complete  defense  system. 
The  vast  machinery  of  the  Council  had  its  ramifica- 
tions in  every  State,  county,  and  smallest  community 
of  our  land,  and  represented  the  people's  will  at  the 
capital,  spreading  before  the  inhabitants  in  every 
district  of  the  United  States  the  National  Government's 
war  problems  and  measures. 

It  created  such  vital  agencies  as  the  War  Industry 
Board,  Aircraft  Production  Board,  Commercial  Econ- 
omy Board,  and  otherwise  acted  somewhat  as  a  great 
administrative  laboratory.  With  the  signing  of  the 
armistice,  it  was  to  have  passed  out  of  existence. 

The  problems  of  reconstruction,  however,  are  so  many 
and  so  vitally  important  as  to  require  the  full  coopera- 
tion of  all  of  our  people.  No  one  realized  this  better 
than  Grosvenor  B.  Clarkson,  then  secretary  of  the 
Council,  and  last  June  he  laid  before  President  Wilson 
a  note  emphasizing  the  need  of  carrying  out  some  sort 
of  survey  of  reconstruction  and  readjustment  problems 

411 


412  Reconstructing  America 

against  the  soldiers'  return  and  consequent  demobiliza- 
tion. 

The  President  and  Secretary  Baker,  too,  were  con-  ' 
fident  then  that  victory  was  almost  in  sight,  so  the 
Council  of  National  Defense  was  encouraged  to  take 
up  the  study  of  reconstruction,  and,  since  that  time,  has 
been  busily  engaged  in  studying  this  problem  and  learn- 
ing what  foreign  countries  have  already  done  along 
reconstruction  and  readjustment  lines,  Mr.  Clarkson 
continuing  his  services,  as  Director  of  the  Council. 
'  This  is  why  this  great  mechanism  is  now  turning  its 
vast  powers  toward  solving  our  Reconstruction  and 
Readjustment  problems. 

The  programs  of  demobilization  and  readjustment 
demand  service  from  every  citizen,  and,  in  the  last 
analysis,  it  is  upon  the  community  council  the  Council 
of  National  Defense  now  relies  to  do  the  work  of  the 
present  emergency. 

At  this  time  "it  is  their  especial  opportunity,"  says 
Director  Clarkson,  "to  relieve  from  all  unnecessary 
hardship  those  members  of  the  community  who  have 
been  willing  to  give  up  everything  in  order  to  serve 
in  the  armed  forces  of  the  United  States  in  the  great 
struggle  for  liberty  and  democracy,  and  as  far  as  possible 
to  free  the  home-coming  of  these  men  from  all  anxiety 
as  to  their  present  and  future  welfare. 

"In  addition  to  all  emergency  work,  a  continuing 
service  lies  before  the  community  councils.  They  have 
brought  out  of  the  war  a  new  unity  and  sense  of  coopera- 
tive community  fellowship.  One  of  the  lessons  which 
we  have  learned  in  the  strain  of  war  is  the  interdepend- 
ency  of  social  effort.  It  is  now,  therefore,  the  duty  and 


Government's  Reconstruction  Plans     413 

opportunity  of  the  community  councils  to  make  the  new 
unity  a  permanent  asset  in  the  national  life,  to  the  end 
of  leavening  the  entire  Nation  with  the  spirit  of  coopera- 
tive and  communal  endeavor." 

Among  the  problems  delegated  to  these  community 
councils  to  handle  by  the  Council  of  National  Defense 
are  such  matters  as  the  welfare  of  the  returning  soldier 
and  sailor,  who  should  be  helped  to  employment,  put  in 
the  way  of  getting  legal  assistance,  if  necessary,  greeted 
upon  his  return  with  receptions,  etc. ;  aid  in  demobiliza- 
tion by  watching  out  for  deserters,  the  reporting  of 
bogus  cases  of  War  Risk  Insurance;  the  food  problem, 
for,  as  America  must  feed  a  starving  world,  the  councils 
must  help  the  county  farm  agent  in  his  national  agri- 
cultural program  for  meeting  the  present  food  emer- 
gency. Community  councils  must  also  aid  in  food  con- 
servation by  keeping  in  touch  with  the  nearest  local 
Food  Administrator,  and  with  the  county  home  dem- 
onstration agent,  whose  work  is  educating  people  in 
food-saving  and  diet  improvement.  And,  then,  there  is 
the  developing  of  a  Boys'  Working  Reserve  wherever 
farm  labor  is  scarce ;  also  fire  protection  to  be  looked 
after. 

Other  very  important  problems  for  the  Community 
Council  to  study  and  work  upon,  are  —  Americaniza- 
tion, for  complete  unity  is  essential  to  successful  de- 
mocracy ;  Children's  Year  Programs,  which  require 
every  child,  up  to  six  years  of  age,  to  be  weighed  and 
measured,  and  proper  medical  and  nursing  treatment 
given  where  necessary ;  regular  school  attendance  by 
children ;  general  poor  relief ;  Liberty  Loan  subscrip- 
tions; etc.  In  fact,  the  Community  Council  should 


414  Reconstructing  America 

be  a  coordinating  agency  for  all  emergency  work  in  its 
community,  and  should  assist  Federal,  State  and  worthy 
voluntary  agencies  in  their  work. 

Although  the  Council  of  National  Defense  began  its 
new  activities  along  the  lines  of  reconstruction  in 
October,  1918,  its  work  has  since  reached  a  point  of 
efficiency  where  it  is  able  to  furnish  every  Government 
department  at  noon  an  outline  of  what  every  other 
department  did  up  to  midnight,  in  regard  to  recon- 
struction. It  is  really  an  administrative  laboratory, 
but  does  not  attempt  to  instruct  the  various  depart- 
ments, or  outline  policies;  but  what  it  does  do,  is  to 
state  a  case  clearly,  outline  to  each  the  work  of  all  others, 
carry  to  the  people  an  outline  of  what  is  going  on,  tell 
the  War  Department  what  the  Treasury  is  doing,  for 
example,  and  outline  to  Congress  the  work  that  the 
various  Federal  agencies  are  doing.  This  same  program 
is  to  be  attempted  throughout  all  of  the  States. 

Studies  of  demobilization  and  unemployment  have 
been  made  and  the  functions  of  war-created  agencies, 
which  have  had  to  be  discontinued,  modified,  or  trans- 
ferred elsewhere,  have  been  analyzed  and  charted. 

The  Reconstruction  Research  Division  records  ad- 
justments in  trade  and  shipping  made  by  the  War  Trade 
and  Shipping  Board  and  railroad  administrations  and 
other  war  agencies,  in  particular,  problems  of  capital 
and  labor.  Valuable  information  is  assembled  as  to 
readjustment  activities  of  private  agencies,  national 
and  international,  and  the  dissemination  of  such  in- 
formation has  been  so  far  most  effective.  Pamphlets, 
charts  and  daily  digests  are  supplied  to  all  Government 
officials^  including  Cabinet  officers,  and  Director  Clark- 


Government's  Reconstruction  Plans     415 

son  has  announced  that  the  Council  of  National  Defense 
is  the  only  agency  at  the  capital  that  is  attempting  to 
make  a  complete  picture  of  the  work  of  all  departments, 
and  to  furnish  complete  data  to  the  various  Federal 
agencies. 

Some  of  the  readjustment  activities  of  our  Depart- 
ments at  Washington,  as  charted,  are : 

Department  of  War.  —  Research  and  education  along 
lines  of  reconstruction  and  readjustment  affecting 
demobilization  and  placement  of  soldiers  and  munition 
workers;  the  education  of  soldiers  overseas;  adjust- 
ment of  labor  conditions. 

Treasury.  —  Preparation  for  further  bond  issues ; 
committee  to  study  and  stimulate  gold  production; 
post-war  military  and  naval  insurance. 

Interior.  —  Provision  of  employment  after  war  by 
Federal  and  joint  Federal  and  State  expenditures  for  in- 
ternal development ;  Americanization ;  land  and  homes 
for  soldiers. 

Post  Office.  —  Marketing  of  farm  products ;  utiliza- 
tion, for  postal  purposes,  of  airships  and  automobiles, 
unsuitable  for  purposes  of  War  Department ;  estab- 
lishment of  motor-truck  routes  to  facilitate  collection 
and  delivery  of  food  products ;  policies  of  public  control 
of  telegraph,  telephone  and  cable  service. 

Agriculture.  —  Cooperation  in  rehabilitation  and  re- 
education of  men  in  service ;  assistance  to  soldiers 
desiring  agricultural  employment ;  cooperation  in  de- 
mobilization and  placement  of  soldiers,  sailors  and 
civilian  Government  employees  and  munition  workers ; 
opportunities  for  employment  in  reforestation  and  road 
construction. 


416  Reconstructing  America 

Commerce.  —  Promotion  of  export  trade ;  collection 
of  material  and  bibliography  on  reconstruction  and 
readjustment;  study  of  economic  reconstruction  tend- 
encies in  belligerent  countries;  research  concerning  re- 
lations of  employers  and  employees  by  representatives 
abroad ;  scientific  research. 

Labor.  —  Cooperation  with  Government  agencies  in 
rehabilitation  and  reeducation  of  men  in  service ;  surveys 
of  labor  situation  and  employment  opportunities  in 
industry;  cooperation  with  Government  and  other 
agencies  in  demobilization  and  placement  of  soldiers, 
sailors  and  civilian  Government  employees  and  civilian 
munition  workers;  Americanization  of  immigrants,  in- 
cluding courses  in  development  of  community  life  and 
activities.  Classification  of  occupations,  their  definition, 
qualifications  therefor,  etc.,  of  value  in  placement ;  re- 
search as  to  foreign  reconstruction  plans.  A  survey  of 
wages,  labor,  housing  and  working  conditions.  Research 
into  relations  of  employers  and  employees  in  foreign 
countries  by  representatives  abroad.  Collection  of 
material  and  bibliography  on  reconstruction.  Co- 
operation in  care  of  children  of  dependent  soldiers. 
Division  of  conciliation  for  adjusting  labor  disputes. 
Associated  with  this  department  the  National  War 
Labor  Board  makes  research  in  internal  relations  of 
employers  and  employees  in  foreign  countries,  also  con- 
cerning foreign  reconstruction  plans. 

Department  of  State.  —  Studies  trade  situation  in 
foreign  countries ;  drafts  reciprocity  and  commercial 
treaties  with  assistance  of  U.  S.  Commission. 

Other  Federal  agencies,  now  busy  in  readjustment 
activities,  are  the  Federal  Board  for  Vocational  Educa- 


Government* s  Reconstruction  Plans     417 

tion,  which  is  cooperating  in  demobilization  work,  re- 
habilitation and  reeducation  of  men  in  service ;  Federal 
Reserve  Board,  which  is  studying  post-war  foreign  trade 
banking  problems;  U.  S.  Food  Administration,  con- 
sidering post-war  effects  on  present  food  regulation  and 
of  its  continuance  under  new  economic  era;  U.  S.  Fuel 
Administration,  considering  post-war  effects  on  present 
fuel  regulations,  etc. ;  U.  S.  Housing  Corporation,  utiliza- 
tion of  houses  already  built,  continuance  of  house-regis- 
tration service  and  of  rent  profiteering  committees; 
U.  S.  Railroad  Administration,  transporting  troops; 
adjusting  labor  conditions;  policies  of  public  control 
of  transportation;  plans  for  increased  use  of  inter- 
nal waterways,  new  terminals,  railroad  statistics ;  U.  S. 
Shipping  Board,  troop  transportation;  development  of 
American  Merchant  Marine ;  regulation  of  foreign  and 
domestic  shipping;  statistics;  reading  courses  for  men 
in  naval  and  cargo  services. 

In  line  with  the  foregoing  far-reaching  readjustment 
activities  of  our  various  Federal  agencies,  there  was 
recently  created  the  Industrial  Board  of  the  Depart- 
ment of  Commerce,  charged  with  the  stabilization  of 
prices  for  basic  materials  in  a  way  to  create  a  firm  founda- 
tion upon  which  the  consumer  can  base  his  future  pur- 
chases and  the  producer  can  form  necessary  production 
cost  estimates.  Through  proper  investigation  and 
stabilization,  it  is  laying  a  foundation  for  the  resumption 
of  American  business  and  furnishing  of  employment  to 
returning  soldiers  and  sailors.  Consultations  are  being 
held  with  various  leaders  of  industry  and  the  first  of 
these  was  with  representatives  of  industries  producing 
basic  material,  such  as  iron,  steel,  lumber,  textiles, 


418  Reconstructing  America 

cement,  copper,  brick,  etc.,  for  the  vital  need  of  the 
times  is  resumption  of  industrial  activity  to  the  fullest 
extent  possible.  The  Committee  feels  that  the  proper 
basis  of  selling  prices  for  the  present  will  be  found  to  be 
upon  a  scale  considerably  higher  than  those  of  the  pre- 
war days,  and  that  the  level  should  be  established  on 
the  lowest  plane  possible,  having  due  regard  to  industry, 
labor  and  government.  Hence,  it  thinks  the  announce- 
ment of  such  a  plane  of  prices  will  immediately  create 
confidence  in  the  buying  public;  and  wants  an  effort 
made  to  wholly  eliminate  the  abnormal,  unbalanced 
stimulation  that  business  has  had  with  resulting  in- 
flated prices,  and  a  new  start  made  upon  a  normal  level. 
Industry  and  labor  have  a  mutual  interest  in  remedying 
present  conditions,  but  industry,  in  the  Committee's 
opinion,  should  take  the  first  step  by  the  reduction  of 
prices  and  commodities  and  require  of  labor  as  little  aid 
as  possible. 

Thus,  the  gigantic  forces,  such  as  the  War  Board  and 
other  newly  created  war  agencies  which,  upon  the  out- 
break of  war,  at  a  wave  of  Uncle  Sam's  wand,  sprang 
into  active  militant  existence,  are  now  demonstrating 
their  far-reaching  power  and  efficiency  in  the  paths  of 
Peace  —  in  binding  up  the  Nation's  wounds  by  wisely 
considered  plans  of  reconstruction  and  readjustment. 


THE    END 


INDEX 


Acceptance  system,  new,  143,  146 
Agriculture,  conditions  in,  309,  352 
Aliens,    our   duty    to,    18;     returning 

home,  257 
America     and     Europe,    partnership 

between,  i 

American  business,  ideals  of,  i8g 
American   railroad   executives,    advice 

of,  66,  71 

Americanization,    of    aliens,  386;    de- 
fined, 392 

Amster,  N.  L.,  on  railroads,  78 
Arbuthnot,    Prof.   C.   C.,   on   costs  of 

war,  157 
Automobile  industry,   138 

Bankhead,     Hon.     Wm.     B.,     Ameri- 
canization bill  of,  395 
Banks,  gold  holdings,  1 24 ;   and  usury, 

147;  operations  of  Federal  land,  326 
Barrett,     Hon.    John,     Pan-American 

trade  opportunities,  199 
Beecher,    Henry    Ward,    on    Democ- 
racy, 9 

Bolshevism,  12,  135,  183,  253,  264 
Bonds,  161 
Brown,    Elmer    Ellsworth,    on    college 

military  training,  377 
Browne,    Lewis   Allen,    Bolshevism   in 

America,  273 
Bruere,    Henry,    Federal    employment 

service,  236 
Bryan,     Hon.     William     Jennings,     a 

Federal  trunk-line  system,  76 
Burleson,    Hon.    Albert    Sidney,    why 

the    Government    should    keep    the 

wires,  85 
Business,     how     the     Government     is 

helping,    184;     ideals   of   American, 

189 
Butler,    President    N.    M.,    education 

after  the  war,  360 


Caminetti,  Hon.  Anthony,  immigra- 
tion danger,  247 

Capital  and  labor,  16,  208,  222, 
234 

Chamberlain,  Senator  Geo.  E.,  a 
permanent  military  machine,  369 

Clarkson,  Grosvenor  B.,  on  recon- 
struction through  community  coun- 
cils, 411,  412 

Class  distinctions,  13 

Colleges,  and  military  training,  377 

Community  councils,  to  aid  in  recon- 
struction, 412 

Congress,  powers  of,  33 ;  and  tha 
wires,  96 

Council  of  National  Defense,  recon- 
struction activities  of,  411 

Credit  Unions,  for  farmers,  313 

Cuyler,  T.  De  Witt,  66,  71 

Daniels,  Hon.  Josephus,  labor's  golden 
age,  226 

Defense,  Council  of  National,  411 

Demobilization  and  unemployment, 
236,  329,  340 

Democracy,  defined,  9;  and  mili- 
tarism, 369 

Department  of  Commerce,  187;  Indus- 
trial Board  of,  417 

Departments,  U.  S.  Government, 
aiding  reconstruction,  415 

"Drys"  a  menace,  407 

Education,  where  it  has  failed,  348; 
after  the  war,  360 

Eliot,  Charles  W.,  defects  in  our 
education  revealed  by  war,  348 

Elmquist,  Charles  E.,  on  wire  con- 
trol, 84 

Emergency  Fleet  Corporation,  work- 
ings of  the,  296 

Employment  service,   Federal,   236 


419 


420 


Index 


England,  reconstruction  in,  213;    her 

navy  saves  America,  383 
Europe,  reconstruction  in,  5 

Farm  economics,  317 

Farmers,  war  activities  of,  227,  309 

Fanning,  opportunities  for  profitable, 

3i9 

Farrell,  James  A.,  foreign  trade  out- 
look, 176 

Federal  agencies  busy  on  readjust- 
ment problems,  415 

Federal  Employment  Service,  236 

Federal  Land  Banks,  326 

Fess,  Hon.  Simeon  D.,  on  railroads,  55 

Financial  reconstruction,  112,  131 

Fisher,  Prof.  Irving,  how  we  must 
pay  costs  of  war,  173 

Fleet  corporation,  296 

Food  problem,  309,  321 

Ford,  Lynn,  menace  of  the  I.  W.  W., 
276 

Foreign-born  Americans,  392 

Foreign  indebtedness  in  America, 
130,  142 

Foreign  trade,  176 

Frankfurter,  Felix,  new  labor  ideas 
taught  by  war,  239 

Gary,  Elbert  H.,  after- war  labor  ques- 
tions, 222 

Germany,  and  League  of  Nations, 
26;  socialization  of,  36 

Glass,  Hon.  Carter,  on  Federal  Land 
Banks,  326 

Gold,  demonetization  of,  117;  decline 
in  value  of,  119 

Gompers,  Samuel,  on  American  labor 
movement,  245;  on  declining  viril- 
ity, 375 

Government  ownership,  perils  of,  30, 
39.  118 

Government  plans  of  reconstruction, 
411 

Harding,  W.  P.  G.,  developing  the 
American  acceptance  market,  143 

Hirst,  Wm.  H.,  on  Prohibition  Amend- 
ment, 396 

Hog  Island  investigation,   57 

Holy  Alliance,  19 

Hoover,  Hon.  H.  C.,  on  food  problem, 


Houston,  Hon.  David  F.,  food  pro- 
duction, prices,  and  distribution, 
309 

Hughes,  Hon.  Charles  Evans,  eco- 
nomic peace  readjustments,  37 

Hurley,  Hon.  Edward  N.,  our  new 
merchant  marine;  oil  coming  fuel 
for  ships,  281 

Immigration,  12,  247 

Industrial  Board  of  the  Department  of 

Commerce,  417 
Industrial    creed,    Mr.    Rockefeller's, 

219 

Industry,  four  partners  in,  208 
I.  W.  W.,  274,  276 

Kahn,  Otto  H.,  on  Government  owner- 
ship, 63 

Kruttschnitt,  Julius,  regional  grouping, 
69 

Labor  Board,  National  War,  416 

Labor,  Department  of,  reconstruction 
work  of,  416 

Labor,  see  Capital 

Lamont,  Thomas  W.,  foreign  indebted- 
ness to  America,  130 

Land,  for  soldiers,  330 

Lane,  Hon.  F.  K.,  farms  for  soldiers, 
329;  on  Americanization,  386 

Latin- America,  trade  possibilities  with, 
200 

Laws,  must  be  uniform,  14 

League,  Anti-Saloon,  403,  409 

League  of  Nations,  19,  390 

Lewis,  Hon.  J.  Hamilton,  what  Recon- 
struction means,  3 

Lincoln,  President,  on  secession,  402 

Loans,  foreign,  in  U.  S.,  141 

Lowell,  A.  Lawrence,  on  college 
military  training,  380 

McAdoo,  Hon.  \Vm.  G.,  32;  railroad 
extension  plan  of,  48;  shippers  and, 
80;  emulates  T.  Caesar,  149;  our 
shipping  and  the  railroads,  307 ; 
profitable  farming  opportunities, 
3i9 

Mackay,  Clarence  H.,  on  government 
ownership  of  telegraphs,  97 ;  letter 
to  Congress,  108 


Index 


421 


Marshall,    Hon.    Thomas    Riley,    on 

Bolshevism,  264 

Merchant  marine,  our,  281,  307,  341 
Mexico,  oil  resources  of,  295 
Military  training,  369,  377,  381 
Miller,  A.  C.,  decline  in  value  of  gold, 

119 

Mob  rule,  408 

Motor-car  industry,  outlook,  136 
Motor  ships,  295 

Oil,  as  fuel  for  ships,  281 
Okuma,  Marquis,  on  Bolshevism,  279 
O'Meara,  Maj.  W.  A.  J.,  on  govern- 
,    ment  control  of  wires,  104 

Packing  houses  and  stockyards,  315 
Pan- America,  and  the  war,  199 
Pay-as-you-go  taxation,  171 
Peace     finance    corporation,     reasons 

for  a,  115 

Peace  readjustments,  37 
Pensions,  unjust,  344 
Pershing,    Gen.   John   J.,   on   military 

training,  376 
Peters,  Ralph,  defines  Americanization, 

392 
Petroleum,  coming  factor  in  shipping, 

284 
Piez,    Charles,    on    Emergency    Fleet 

Corporation,   296 
Police  power,  398 
Preparedness,  369 

Prices,    inflated,   u,   121,   283;    stabi- 
lizing, 417 
Prohibition,    W.    H.    Hirst    on,    396; 

Hon.  W.  H.    Taft  on,  404;     Hon. 

Henry  Sage  on,  406;    Henry  Wat- 

terson  on,  407 

Railroads,  problem  of  the,  President 
Wilson,  46;  Hon.  Wm.  G.  McAdoo, 
48,  307;  Dir.-Genl.  Hines,  49; 
earnings  1918,  53;  Hon.  Simeon 
D.  Fess,  55 ;  F.  A.  Vanderlip,  60; 
Otto  H.  Kahn,  63;  T.  De  Witt 
Cuyler,  66;  Julius  Kruttschnitt, 
69;  T.  P.  Shouts,  73;  Hon.  W. 
J.  Bryan,  76;  N.  L.  Amster,  78; 
Clifford  Thorne,  79;  and  mer- 
chant marine,  307 

Readjustments,  economic,  37,  189 


Reconstruction,  basis  for  constructive 
settlements,  i ;  meaning  of,  3 ; 
in  Europe,  5,  19;  in  our  Democracy, 
9;  railroads  and,  46;  wires  and, 
84;  financial,  112;  business,  136, 
176,  189;  foreign-trade,  176;  in- 
dustrial, 208;  ship-building,  281; 
agricultural,  309;  educational,  348, 
395;  military,  369;  aliens  and,  386; 
U.  S.  Government's  plans  for,  411 

Redfield,  Hon.  Wm.  C.,  rebuilding 
our  foreign  trade,  180 

Reed,  Senator  James  A.,  on  Bolshe- 
vism, 265 

Roberts,  George  E.,  the  Nations'  debts 
in  America,  132 

Rockefeller,  John  D.,  Jr.,  cooperation 
in  industry,  208 

Russell,  C.  E.,  on  Bolshevism,  278 

Russia,  dominated  by  anarchists,  20 

Sage,     Hon.    Henry,    on    Prohibition 

Amendment,  406 
Schiff,  Jacob  H.,  on  railroad  problem, 

65 
Schwab,    Charles    M.,    labor    to    rula 

the  world,  224 
Sex  antagonism,  260 
Shipping,  American,  281 
Shonts,  T.  P.,  on  railroad  problem,  73 
Sisson,   Frank  H.,  our  war  debt  and 

tates,  155 
Smith- Bankhead  Americanization  Bill, 

393 
Smith,  Hon.  Hoke,  rebuilding  injured 

soldiers,   33  2;    Americanization   bill 

of,  395 
Soldiers,  farm  plan  for,  329;   rebuilding 

injured,  332 
Speyer,  James,  common  senso  toward 

capital  and  labor,  231 
States'    rights,    attempt    to    destroy, 

271;    and  prohibition,  396 
Sutherland,    Hon.    George,    prepared- 
ness best  guarantee  of  peace,  381 

Taft,  Hon.  Wm.  H.,  international 
reconstruction  through  the  League 
of  Nations,  19;  on  Prohibition 
Amendment,  404 

Taxes,  155,  160 

Telegraphs,  see  Wires 


422 


Index 


Thomas,  Senator  C.  S.,  reconstruction 
needs  in  our  Democracy,  9 

Thome,  Clifford,  government  opera- 
tion distasteful  to  shippers,  79 

Trade,  conscience  of,  8;  foreign,  176, 
1 80;  combines,  346 

Treaty  readjustments,  F.  B.  Whitney, 
194 

Unemployment,  236,  329 

United  States,  a  forecast,  113;  bank- 
ing leadership,  128,  146;  war 
debt,  155;  the  war's  effect  on,  197; 
leadership  of,  225 ;  stabilizes  indus- 
try. 239I  aid  for  demobilized  sol- 
diers, 330;  government  recon- 
struction plans,  411 

Universal  military  training,  372 

Usury,  147 

Vanderlip,     Frank     A.,     problem     of 

the  railroads,  61 
Van  Kleeck,  Mary,  after-war  status  of 

women  workers,  259 
Vocational     education,     for     soldiers, 

334;    Federal  Board  for,  416 

Wages,  it 

War,  costs  of  the,  155,  173 


Warburg,  Paul  M.,  some  phases  of 
financial  reconstruction,  112;  ac- 
ceptances, 146 

Wars,  causes  of,  195 

Watson,  Senator  James  E.,  dangers 
in  autocratic  authority  and  govern- 
ment ownership,  30 

Watterson,  Henry,  on  Prohibition,  407 

Weeks,  Senator  John  Wingate,  problem 
of  demobilized  workers,  340 

Wheeler,  Harry  A.,  ideals  of  Ameri- 
can business,  189 

Whitney,  F.  B.,  American  attitude 
on  treaty  readjustments,  194 

Williams,  Hon.  John  Skelton,  usury 
and  the  banks,  147 

Willys,  John  North,  business  outlook, 
136 

Wilson,  Hon.  Wm.  B.,  autocracy  of 
anarchy,  234 

Wilson,  President,  the  great  day  of 
settlement,  i ;  problem  of  the 
railroads,  46 

Wires,  public  control  of,  Hon.  Albert 
Sidney  Burleson,  85 ;  Clarence 
H.  Mackay  on,  97 ;  in  Europe,  99 

Women  workers,  after-war  status  of, 
259,  343 

Workers,  problem  of  demobilized,  340 


DC  SOUTHERN  REGIONAL  LIBRARY  FACIUTY 


Illlllllllll  Hill  I 

A    001  371  920    8 


